Many firms undergoing full-fledged restructuring

Moves include scaling down payrolls, scrapping unprofitable businesses


More domestic companies are eager to set up contingency plans or conduct voluntary redundancy programs as economists raised the possibility of a long-term economic downturn from the eurozone woes.

Their movement has been further accelerated after Woongjin Holdings and Kukdong Engineering & Construction shocked the market last month by filing for court receivership from their insolvent financial status.

According to a poll by the Korea Institute for Industrial Economics & Trade on 557 firms, about 29.3 percent (162 firms) of them responded that they have been under contingency mode in their management.

About 32 percent (178 firms) of the respondents said they are likely to follow suit within six months, the institutes data showed.

On Wednesday, GS Group chairman Huh Chang-soo instructed 150 executives of the conglomerate to push for “choice and concentration” in mapping out business strategies for next year, reiterating the projected difficulties.

He said it is necessary to single out lucrative business sectors, which could guarantee future growth potential of GS Group.

“Depending on who best deals with the current situation, their fate could be largely different in the coming months. We should continue to prepare ourselves,” he said.

SK Communications launched an early-retirement program earlier this week amid declining profitability.

Analysts said labor restructuring of the company, which operates Cyworld and Nate.com, is inevitable, citing its year-on-year drop in operating profit.

“SK Communications’ decision to conduct a voluntary redundancy program could be spread to the overall information technology industry,” an analyst said.

A survey on 25 major business groups showed that the current economic predicament was either more serious (64 percent) or similar (36 percent) to the global financial crisis in 2008.

Ninety-six percent said the Korean economy was unlikely to grow 3 percent or more. Four out of five said they do not expect the ongoing crisis to be resolved by the second half of next year.

The conglomerates picked sluggish domestic sales (46 percent) and low exports (29 percent) as their biggest hardships, followed by falling product prices (13 percent), lack of funds (4 percent) and increasing production costs (4 percent).

Many said they already cut investment or employment (16 percent) or were considering it (20 percent).

The financial sector has also joined the austerity drive, with banks reducing salaries or urging workers to take vacations, while credit card issuers and insurance companies are downsizing staff.

The extent of their retrenchment efforts from next month could widen based on the results of the ongoing collective bargaining between the financial trade union and management council.

By Kim Yon-se (kys@heraldcorp.com)