Dropping Weight
POSCO came to a definite decision to decrease the number of its subsidiaries in half by 2017.
During a conference held at the Korea Exchange in Yeouido, Seoul, on July 15, Chairman Kwon Oh-joon unveiled measures to restructure the company, including reorganization of its business portfolio to strengthen profitability, clarification of its decision-making processes, improvement of employee competitiveness, implementation of personnel management in a fair manner, improvement of business practices, and enhancement of ethical management.
Kwon said, “The company has pushed ahead with the POSCO Innovation 1.0 Program, which focuses on the improvement of its steel competitiveness, from last year, but the business conditions at home and abroad have rapidly changed due to the global demand reduction of steel, growing deficits of the subsidiaries, and low credibility of protracted prosecutors’ probes. If we leave the situation as it is, the whole group will be in danger of going bankrupt. Accordingly, we have come out with strong business reform measures.”
The chairman said the company will first reorganize its business portfolio into categories – materials, energy, infrastructure development, and trading – focusing on steel. It will also halve the number of subsidiaries, getting rid of those that do not have competitiveness, from the current 48 by 2017. To clarify who is responsible for management decisions, POSCO will expand its real-name investment system. It will also check business risks while improving investment efficiency by introducing a performance-based system. All deals will be carried out through a public tender, excluding the possibility of special favors and maximizing purchases and cost competitiveness. POSCO will immediately dismiss employees for any of the “Four Crimes” of bribery, embezzlement, sexual harassment, or information manipulation, regardless of their rank, in a new “One Strike Out” system.
In the conference, POSCO announced that the group posted 15.19 trillion won (US$13.27 billion) in sales and 686 billion won (US$599.39 million) in operating profits in the second quarter. The sales figures decreased by 9.1 percent and operating profits dropped by 18.3 percent from a year ago due to a continuous steel and E&C industry slump in the global market.