Next Year’s Plans in Fog
South Korea's five largest business groups, which accounted for 39.3% of the total sales of the top 500 South Korean enterprises last year, are finding it hard to set up their plans for next year due to internal and external uncertainties.
According to market research firm FnGuide, Samsung Electronics’ operating profit estimate for next year fell from 66.4228 trillion won to 60.4977 trillion won in three months due to owner-related risks. Samsung Electronics vice chairman Lee Jae-yong is currently on trial for bribery and the prosecution's imminent investigations into Samsung BioLogics’ accounting fraud allegations could affect the Supreme Court's judgment. Besides, the Korea Fair Trade Commission recently sued Samsung Electronics chairman Lee Kun-hee for having owned two fake subsidiaries for close to 30 years.
The Hyundai Motor Group is suffering from poor performance. Both Hyundai Motor and Kia Motors posted an operating profit margin of about 1% in the third quarter and their sales still remain sluggish in the United States and China alike. The group attempted to turn Hyundai Mobis into a controlling company in March this year to reform its governance, but the plan was thwarted due to the opposition of major shareholder, including the U.S. activist hedge fund Elliott Management Corp.
The SK Group has to deal with the limited growth of its telecom and semiconductor businesses and the slowdown of the Chinese manufacturing sector. In addition, SK Telecom has yet to be turned into a holding company and group chairman Chey Tae-won’s divorce suit has not yet finished.
When it comes to the LG Group, the only one of the five where a fourth-generation owner took the helm, the challenges include stabilization of the group under new chairman Koo Kwang-mo, restoration of the profitability of major businesses like smartphone and display, and structural reorganization for growth of new business items like biotech and auto parts.
The Lotte Group, in the meantime, restarted its New Lotte Plan after chairman Shin Dong-bin was released from prison on probation last month. Its most urgent tasks include listing of Hotel Lotte and sale of financial subsidiaries for corporate governance restructuring. The group is planning to sell Lotte Card in this regard, but few are interested in the credit card company. The Supreme Court ruling for the chairman is scheduled for next year and it may affect the group’s plan again.