The Personnel Shuffle
As Samsung Electronics Vice Chairman Lee Jae-yong is involved in the management, the group is expected to carry out a business restructuring, mergers to strengthen the governance structure, and a massive personnel reshuffle due to poorer business performance. In particular, the economic recession in emerging countries, including China, is one of the reasons to take preemptive actions to restructure and relocate the labor force.
In the past year alone, small and large changes have continued, such as the merger between Samsung C&T and Cheil Industries, and the possible merger between Samsung Engineering and Samsung Heavy Industries. In the group, “restructuring fatigue syndrome” is also detected. However, six to seven more business reorganizations are expected. In many subsidiaries, the same rumor is rapidly spreading that the company will soon cut its labor force along with poorer business performance.
Samsung Electronics is the one most affected. The company is suffering from China’s low-end smartphones and the fall in semiconductor prices. Regardless of official denial, the possibility of a Samsung Electronics manpower spinoff is constantly being raised among employees.
Samsung SDI needs to adjust its workforce due to manpower excesses in the division, after merging with Cheil Industries’ Chemicals and Materials last year. In addition, Samsung SDI, Samsung Display, and Samsung Electro-Mechanics are the parts subsidiaries of Samsung Electronics. Accordingly, their businesses should be restructured when the sales of Samsung Electronics decrease. Samsung C&T, which merged with Cheil Industries, still needs to perform actual integration work. This is due to the fact that it has four presidents, and needs to cut down the number of executives and employees.
Despite the possibility of the merger with Samsung Heavy Industries, Samsung Engineering is denying the rumor. Also, Samsung Fine Chemicals is suffering from a rumor of its sale, as Samsung SDI recently took over the cell material unit of Samsung Fine Chemicals. The rumors continue that Samsung SDS and Samsung Medison will merge with Samsung Electronics. Moreover, voluntary retirement in Samsung Heavy Industries and some financial subsidiaries are more strongly demanded than before.
The nation’s top four business groups, including Samsung, are suffering from performance deterioration and the absence of next-generation growth engines in the global economic recession.
The Hyundai Motor Group, the nation's second-largest conglomerate, is also afflicted with troubles both at home and abroad. Due to the sales growth of imported cars, the company is seeing a decrease in domestic market share. Also, the labor union is threatening to go on a strike for higher wages. Its overseas sales and profitability has also plunged due to slow domestic demand in China and the depreciation of the currency in Russia and Brazil.
Some continuously raise the possibility that the Hyundai Motor Group will carry out a reshuffle in emerging countries such as China, Russia, and Brazil, as well as in the domestic market, in a bid to restructure the divisions with low sales. However, others say that it is a time to stablize the group, as it has the best-ever market share in the global market, despite poor sales in emerging countries. In fact, Hyundai-Kia Motors saw a 19.3 percent share – Hyundai Motor with 9.1 percent and Kia Motors with 10.2 percent – in the Russian market in Aug., up 2.6 percentage points from a year ago. Also, sales of the group in the U.S., which its vice chairman Chung Eui-sun will visit soon, reached an all-time high with 130,909 units in Aug.
SK Group is struggling with the fact that most subsidiaries are seeing poor sales, except for SK Hynix. The only comforting part is that Chairman Chey Tae-Won is now marking efforts to secure a new growth engine after the release. Chey visited China and Hong Kong last month, and is in Spain now to attend the opening ceremony for a new joint lubricating oil plant.
Along with the return of its chairman, the SK Group is focusing on nurturing its new growth engine in earnest. It means that Chey can change the company's senior management in the process in a bid to clear the atmosphere. Considering the fact that the group changed all CEOs of its major subsidiaries, such as SK Innovation and SK Telecom, at the end of last year, there is the possibility to change in its executives, excluding CEOs.
The LG Group is in a more desperate situation, as its major subsidiary LG Electronics is suffering from poor sales. Its chairman, Koo Bon-moo, will hold a meeting next month with presidents of its major subsidiaries to encourage the innovation in order to overcome a crisis. However, the situation seems serious and difficult.
Due to more intense competition with other smartphone producers, LG Electronics is expected to see lower than 1 trillion won (US$849.98 million) in operating profits this year, which is the lowest sales in four years. The Mobile Communication (MC) division, which is in charge of the smartphone business, is likely to relocate or cut up to 20 percent of its 8,000 employees. LG Display and LG Chem, other major subsidiaries, are in the same situation. Its new growth businesses, the OLED and electric vehicle batteries, are unlikely to run a surplus within this year. In addition, both companies are likely to suffer from poor performance in the second half of the year, as display and petrochemical products will experience a supply excess in earnest due to the global economic recession.