Korean conglomerates brace for tough times in second half of year
Chiefs of the nation’s major business groups called on the government to put more efforts into revitalizing the economy through deregulations at a meeting in Seoul on Thursday.
Seoul members of the Korea Chamber of Commerce and Industry shared the view that “the corporate sentiment has been worsening since the second half of 2010 and exports are in a declining mode.”
The participants including KCCI chairman Sohn Kyung-shik expressed worries over tough regulations on the business sector.
“We want the political sector to actively foster the environment which can help local enterprises secure global competitiveness,” a KCCI official said.
They also expressed anxiety about the ongoing strike of the nation’s unionized truck drivers, predicting a critically negative impact on the economy from the general strike, which comes three years after truckers staged a strike in June 2009.
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KCCI chairman Sohn Kyung-shik (right) meets business leaders including Doosan Group chairman Park Yong-mann (second from right), NXP Semiconductors Korea chairman Shin Bark-jae (third from right) and STX chairman Kang Duk-soo on Thursday. (Kim Myung-sub/The Korea Herald) |
The business sector also urged an early resolution of the strike, saying collective action was not desirable at a time when the global economy shows signs of worsening due to the eurozone fiscal crisis.
“Side effects will be serious in terms of attaining economic recovery while the nation is suffering difficulties, affected by the eurozone debt woes,” the Korea Chamber of Commerce and Industry said in a statement.
The KCCI stressed that the walkout could deal a critical blow to industrial distribution channels including exports.
The union is demanding a 30 percent hike in trucking fees and legislation of a guaranteed minimum wage and labor rights.
The business community has shifted into emergency mode as persistent global economic woes are feared to dampen demand and growth in the second half of this year, sources said Thursday.
Companies are in the process of revising their business strategies for the coming six months to reflect growing challenges.
Shifts could include selling off assets to secure liquidity, cutting back on investments and hiring, and reducing overall costs.
Initially, economists forecast a slow expansion early in the year due to eurozone problems and sluggish conditions in other parts of the world, followed by accelerated growth toward the second half.
However, mounting uncertainties in European countries such as Greece and Spain, and slower-than-expected growth in the United States and China are causing many to reassess their management strategies.
Private think tanks such as the LG Economic Research Institute and Hyundai Research Institute have recently downgraded growth estimates for Asia’s fourth-largest economy to 3.0 percent and 3.5 percent, respectively. In the past, LGERI and HRI had expected the country’s growth to reach 3.6 percent and 4 percent respectively.
The Washington-based International Monetary Fund said South Korea’s growth may dip to 3.25 percent this year, tracking overall slowdown in the global economy.
Reflecting this, local industries in such areas as automobiles, refining, steel and electronics are all preparing for hard times.
Local carmakers such as Hyundai Motor Co. and Kia Motors Corp., which did relatively well in the first half thanks to the popularity of newer models, said a slowdown in growth in emerging markets such as China and India could require adjustments in growth plans for 2012.
The Korea Automotive Research Institute said global market growth in the second half will reach around 4 percent, down from 7 percent in the first six months of the year.
In the refining sector, companies such as GS Caltex Corp. said they are introducing early retirement programs in a bid to shave costs. The industry reported weak earnings in the first half as the so-called refining margin declined.
Local shipbuilders like Hyundai Heavy Industries Co. and Samsung Heavy Industries are expecting lean business conditions as many European countries are holding back on placing new orders for ships. Such companies have been able to sell high-value added ships this year, but overall sales fell shy of expectations.
Shipping lines said high fuel prices have hurt earnings this year, which have been compounded by a general drop in trade. Such conditions may affect the industry as a whole for the time being, they said.
In the steel sector, POSCO said it plans to cut back on all unnecessary expenses and delay investment to ensure the company has adequate liquidity. It said efforts are underway to secure assets that can be readily converted into cash.
For electronics, solid demand for smartphones and tablet PCs have helped sales, but weaker-than-expected TV shipments have dampened growth expectations.
Large conglomerates such as SK and Hanwha groups said they are keeping close tabs on economic conditions and are ready to revise corporate strategies for this year.
Overall, corporate insiders said efforts are underway to reduce outlays and costs to minimize losses, but stressed that if outstanding issues facing the eurozone and large economies are not resolved quickly, growth expectations for this year will have to be pushed down.
By Kim Yon-se and Yonhap News
(
kys@heraldcorp.com)
