Korean firms brace for restructuring

Kim Yon-se and Park Min-young
Asia News Network

Korean firms brace for restructuring

By Kim Yon-se and Park Min-young in Seoul/The Korea Herald/16 November 2012 =

Seoul (The Korea Herald/ANN) - About 15 percent of South Korea's 600 major enterprises said they plan to conduct corporate restructuring amid growing uncertainties at home and abroad next year, a poll showed Thursday.

According to a survey on the 600 largest firms - in terms of sales scale - by the Federation of Korean Industries, 62 percent of the respondents said the business environment was projected to worsen next year.

The FKI, a business lobby, said it has found that 15 percent of the respondents are mapping out plans for restructuring such as reduction of its payroll, sales of some assets and scrapping some business sectors.

The poll showed that 46 percent of the 600 firms picked weaker domestic demand as the key negative factor, 28 percent with worsening conditions for exports and 15 percent with rising cost burdens for raw materials.

As for corporate investments next year, 40 percent said their investments next year would remain at a level similar to this year's, while 27 percent said they will cut down on investments by a small margin and 9 percent by a large margin.

This shows that companies have conservative investment plans due to bad economic conditions at home and abroad.

In particular, a growing number of firms in the business and financial sectors recently launched a manpower restructuring scheme.

Samsung Card, a financial unit of Korea's biggest conglomerate Samsung Group, will receive about 100 voluntary redundancy applications starting next week.

More than 3 percent of total employment will be slashed.

Executives as well as regular employees will be subject to the restructuring plan, reports said, and retirees are expected to receive a retirement allowance worth two years' salary.

"It is true that we are examining the voluntary retirement program, but the exact number of employees to be withdrawn or retirement conditions are not yet decided," said a Samsung Card spokesperson.

Industry insiders say that the worsened profitability of the company resulted in the restructuring plan. Its operating profit for 2013 is expected to be down by about 169.6 billion won, according to Taurus Investment Securities, due to various reasons including the new credit card commission fee system, decline of credit card users and the sluggish economy.

Speculation is growing that other financial units of Samsung Group may begin restructuring plans as well. Samsung Fire and Marine Insurance is receiving voluntary retirement applications until this month from employees who served at the company for more than 12 years.

While Citigroup Korea is moving to join the manpower restructuring mode, SK Communications carried out an early-retirement program last month amid declining profitability.

According to a poll by the Korea Institute for Industrial Economics & Trade on 557 firms, 162 of them responded that they have been under contingency mode in their management.

Another 178 firms of the respondents said they are likely to follow suit within six months, the institute's data showed.