Companies looking for signs of prolonged recession in Europe, U.S.
Large Korean companies struggled to appear unfazed but many, especially those dependent on overseas sales, seemed to be rethinking their business strategies in the aftermath of a financial shock stemming from the U.S.
Hyundai Motor is currently said to be raking the data it received on the U.S. economy to search for new ways to do business in the region in case the recession becomes prolonged.
Some in the company are reportedly calling for the firm to take preemptive measures to prepare for such a situation.
“The U.S. is a major market for automakers, so we definitely will need to conduct detailed monitoring to prepare for possibly prolonged economic recessions in the U.S. and also Europe,” one company official said, declining to be identified.
In addition to the fact that the two areas make up a significant portion of the carmaker’s clientele ― Hyundai cars take up more than 10 percent of the U.S. market ― a rise in U.S. government bond interests may touch off increases in other interest costs including those on auto loans to eventually undermine car sales, experts warned.
Exchange rates, if affected by the latest market turmoil, also would hugely impact exporters such as automakers.
Adding to these concerns, the Korea Automobile Research Institute has predicted that the U.S. economy was likely to continue underperforming, possibly longer than expected.
“Therefore, a thorough and sustained review of future uncertainties are necessary, along with consideration for preemptive measures that may have to be taken in case of a double dip in the U.S. economy,” the institute said.
Hyundai Motor Chairman Chung Mong-koo is now said to be closely watching the U.S. market indicators since holding emergency meetings with his executives.
Chung is well aware that the automotive sector was one of the hardest hit during the 2008 crisis.
Samsung, meanwhile, chose to stay mostly quiet on its concerns and how it would deal with the economic situation at hand.
“There is a lot of concern over the latest financial crisis stemming from the U.S., but Samsung has nothing particular to comment,” said one Samsung official on Wednesday after executives gathered for a weekly meeting.
But industry watchers pointed out that the IT sector, normally one of the nation’s leading industries, will have to react soon as it has been hit by a double-whammy.
This is because the firms were underperforming even before the U.S. crisis slammed stock markets around the world, with many household appliances selling poorly.
Televisions were one of the worst-hit areas as demand slackened on anemic economic growth and households became reticent to replace their sets.
The sluggish demand was particularly unfortunate for the Korean companies as many of the conglomerates depend on displays such as LCDs for a large part of their business.
On top of that, IT companies are in danger of losing customers as the U.S. market accounts for up to one-third of Samsung Electronics’ and LG Electronics’ sales of appliances and mobile phones.
Company officials were reluctant to issue comments but hinted that if the situation worsens, they will have to come up with ideas for cutting costs to the extreme.
“For now, we plan to keep our investment plans in place,” said one LG official who requested anonymity.
On Wednesday, the local stock market seemed to recover from a shocking two-day dip, with the benchmark KOSPI recovering ground by starting out above 1,800 points to mark the first rally in a week.
A rebound in the U.S. stock markets appeared to have fueled the rosier opening, analysts said.
By Kim Ji-hyun (
jemmie@heraldcorp.com)
