Korean companies say crunch time is comingKorea Inc. is bracing for major turbulence.
LG Display is offering early retirement packages to employees for the first time since the global financial meltdown of 2008.
“We are offering early retirement by the end of November to employees who have worked for the company for more than five years,” said a spokesperson, “except for personnel researching organic light-emitting diodes [OLED].”
Korean Air’s 2020 business plan is built on the premise that the won-dollar exchange rate will rise to 1,200 won. That’s a 2.5 percent devaluation from the 1,170 won exchange rate as of Thursday.
Before writing up next year’s business plan, companies are tightening their belts. A sense of crisis that started in the auto industry in the middle of this year is spreading to petrochemicals, semiconductors, retail - virtually all parts of the economy.
Auto industry was the first to sound the alarm earlier this year. Renault Samsung Motors started offering early retirement packages in September. “Some 40 employees filed applications,” said a spokesperson from the auto company.
Renault Samsung used to produce Nissan Rouges for Nissan Motors in its factory in Busan. After that contract expired, the auto company had to slash hourly production to 45 cars from 60 cars. Following that adjustment, about 400 factory workers, who account for more than 20 percent of 1,800 production employees, were laid off.
GM Korea plans to merge two shifts into one at its Changwon factory, where compact cars and small-sized commercial vehicles are produced. SsangYong Motor is working on a turnaround plan that cuts staff by 20 percent, reduce the executive payroll by 10 percent and downsizes employee benefits.
Korea’s top 20 companies are feeling the pinch. Hanwha and Doosan’s retreat from the duty-free shop business was the most noticeable sign. “To prepare for the future, we decided to relinquish our business license for the duty-free shop business as it failed to generate profits and has a bleak outlook,” said an official from Doosan.
CJ plans to dispatch half of its 440 employees from the holding company to affiliates in order to strengthen field management. CJ’s ratio of operating profit to revenue, which stood at 7 percent in 2017, has recently fallen to 3 percent.
“The majority of employees will be affected except for key personnel,” said a spokesperson for CJ.
Lotte declared a kind of company-wide emergency on Oct. 30. This year, Lotte closed four department stores - the Incheon, Daegu, Anyang and Bupyeong branch - along with a Lotte Mart in Deokjin and an outlet store in Incheon.
Lotte is also selling assets in order to convert stores under direct management into franchise branches.
“As uncertainties in the domestic and global economy intensify, thorough preparations must be made for the future,” said Hwang Kag-gyu, Vice Chairman of Lotte Group, when he announced a company emergency in front of about 150 people including representatives of affiliates.
Shinsegae Group, which runs Korea’s biggest discount chain, E-mart, is now under de-facto emergency status after it replaced 11 board members in a reshuffle last month.
Large investments in plant equipment are frozen.
Samsung Electronics revealed its plan to “manage supply and make investments flexibility according to the market situation of semiconductors” when it recently announced third quarter results.
“Investments [next year] will be reduced to a significant level compared to this year,” said SK Hynix.
Most companies worry about liquidity and the exchange rate along with geopolitical risks next year.
“Risks are growing including China’s growth. Domestic companies should prepare for possible scenarios,” said Han Jae-jin, a researcher at Hyundai Research Institute.
BY KANG KI-HEON, MOON HEE-CHUL AND KIM HYO-SUNG [email@example.com]
More in Industry
Chuseok delivery strike canceled as headcount increased
BMW Motorrad channels 1936 for its latest bike
Battery business IPO won't affect LG Chem's controlling stake, company says
Hyundai Construction Equipment signs Algeria forklift deal
FSS permits financial sector workers to use networks remotely