|Samsung Electronics' headquarters in Seoul / Korea Times file|
By Kim Hyun-bin
Major companies are taking a conservative approach as the economy is taking a rapid downturn, by shrinking investments and production to cope with surging inflation, foreign exchange rates and interest rates, according to company officials, Sunday.
Major domestic companies have entered emergency management amid the worsening economic situation. On Sept. 29, LG held an offline CEO workshop for the first time in three years to discuss medium- to long-term management strategies. Samsung also discussed current economic issues through a meeting of CEOs on Sept. 26, while SK is scheduled to hold a "CEO seminar" this month.
As companies prepare for the worst economic downturn, changes are also occurring to their management plans, such as withdrawing investments and reducing businesses. Hyundai Oilbank and Hanwha Solutions announced last month that they would withdraw their plans to establish major production facilities.
SK hynix is reported to be considering entering into emergency management after it recently suspended the expansion of its Cheongju plant. Samsung Electronics' semiconductor Device Solution (DS) division is also resetting its business scenario, such as lowering the sales forecast for the second half of this year by about 30 percent from the April forecast.
Domestic industrial production has also continued to decline. According to Statistics Korea, domestic semiconductor production in August decreased by 14.2 percent from the previous month. It showed the largest decrease in close to 14 years since December 2008.
The government held a meeting with the executives of major conglomerates and started to come up with countermeasures. On Sept. 30, President Yoon Suk-yeol presided over a macro-financial inspection meeting attended by the financial officers of large corporations such as Samsung Electronics, SK Corp., LG Electronics and Hyundai Motors in Seoul.
"There are concerns about a slowdown in the real economy due to the global interest rate hikes and market instability," Yoon said.
Accumulating inventory is also a problem. As of the end of the first half of the year, the total inventory of Samsung Electronics' DS division stood at 21.50 trillion won, up 30.7 percent from the end of last year. SK Hynix also had inventory assets of 11.87 trillion won as of the end of the first half of the year, up 33.2 percent from the end of last year.
Large-scale investments are also being put on hold. HD Hyundai announced last month that its subsidiary, Hyundai Oilbank, has decided to stop investing in a crude oil distillation unit (CDU) and the vacuum distillation process (VDU), worth 360 billion won.
"The profitability of the main investment is worsening due to the rise in investment costs, and it is difficult to make a reasonable prediction of the future raw material market outlook," HD Hyundai said.