Economy, election force companies to slim down

By Korea Herald

Companies downsize on slow economy, anti-chaebol election pledges

  • Published : Nov 18, 2012 - 22:44
  • Updated : Nov 18, 2012 - 22:44
Korea’s corporate landscape is expected to witness some major pruning as companies, most noticeably the conglomerates, are avidly slimming down amid a deepening economic slump worldwide.

Politics, however, also may be playing a part in their downsizing, as major presidential candidates are proposing pledges devised to ensure fair competition ― essentially meaning that conglomerates will face more restrictions to give their smaller counterparts a bigger advantage.

The country’s top 10 industrial groups are accordingly unleashing plans for brisk restructuring.

Samsung Group and LG Group said they would pare away all noncore operations while merging overlapping affiliates to cut their subsidiaries by 5-10 percent, respectively.

Samsung Group, for instance, plans to shut down four of its 80 affiliates by early next year. The number had been 59 in 2008.

For this goal, Samsung Fiberoptics ― a manufacturer of optic fiber and cables ― will be merged into Samsung Electronics, Samsung said.

Semes, another affiliate in charge of producing equipment for semiconductors and displays, will merge with two sister firms to become reborn as a single affiliate in January next year.

SB LiMotive, a maker of batteries for electric cars, will be merged into Samsung SDI.

Samsung Electronics, meanwhile, reduced facility investment for the second straight quarter during the July through September period, with investment volume reaching 4.5 trillion won ($4.1 billion). This was significantly lower than the 7.7 trillion won in the first quarter of this year, and the 6.1 trillion won in the second.

Industry sources believe the electronics company is bracing for sluggish economic conditions.

Another top conglomerate LG Group plans to close seven of its 64 affiliates through sales, liquidation or M&As.

The first part of the process involves main subsidiaries such as LG Household and Healthcare closing down its smaller affiliates, trading companies such as Win International and Plus One.

In 2008, LG had 36 subsidiaries, which almost doubled up to this year.

“Our goal is to focus on our core future drivers of growth, such as developing alternative energy resources,” said one LG Group official.

SK and Lotte are no exception.

SK Group will be reducing its affiliates to 91 from 96 by merging overlapping divisions and eliminating noncore operations.

As a part of this agenda, SK Networks Service has recently merged with SK Networks Internet, while three of SK Hynix’s affiliates were merged into one. The move comes after another SK affiliates, SK Communications, decided to lay off up to 300 of its employees.

Lotte has already reduced its affiliates to 75 from 78 this year, and next year the number is to reach 72.

Steelmaker POSCO is seeking M&As for 10 of its affiliates, while Hyundai Motor Group has this year cut the number of subsidiaries to 57 from the 63 last year.

“The global economy is quite uncertain, so new investments are unthinkable,” said one Hyundai official. “Our plans for now are to focus on our core operations and grow further on this foundation.”

By Kim Ji-hyun (