Shrunken Conglomerates
On October 25, approximately 1,000 executives at the Hyundai Motor Group’s 51 subsidiaries voluntarily cut their annual salary by 10% in order to cope with the ongoing decline in sales. Their voluntary salary cut is for the first time since January 2009. During the first nine months of this year, Hyundai Motor Company and Kia Motors sold 5,621,910 cars worldwide, down 1.8% from a year ago. Besides, the group’s operating profit ratio has fallen for five years in a row.
This is just one of the examples of a large number of South Korean conglomerates restructuring themselves by means of manpower reduction, cost reduction and the disposal of secondary subsidiaries in an effort to deal with a recession in advance. The only part that is different from the past is that the processes are being led by owners instead of CEOs.
Recently, SK Group chairman Choi Tae-won told each subsidiary to set up an emergency control tower for responding to urgent management situations. The idea is to discuss urgent business issues in real time and accelerate decision making based on inter-subsidiary communication.
LG Group chairman Koo Bon-moo, in the meantime, told subsidiary executives at a recent meeting with them to look closely into other companies’ moves and factors such as exchange rates in setting up business plans for next year. Hanwha Group chairman Kim Seung-youn recently replaced presidents with those in their 50s and released a comprehensive plan for corporate culture reform.
POSCO Group is disposing of its subsidiaries in non-steel sectors. Last year alone, it carried out restructuring in 34 subsidiaries and disposed of 12 different assets, including POSCO E&C’s shares in the Public Investment Fund of Saudi Arabia. It is going to complete similar processes with regard to 35 subsidiaries and 19 assets by the end of this year.