Refiner put on emergency status

By Park Si-soo

GS Caltex has gone into emergency mode because of the prolonged global recession and military tension in Iran that have cast a pall over the refiner’s business outlook.

Adding further woe to the country’s second largest refiner is mounting pressure to keep gasoline prices low. Analysts said the pressure is expected to increase until the end of the year because the government will join forces with the ruling Saenuri Party to do so as a way to appeal to voters ahead of the presidential election in December 19.

GS Caltex Chairman Hur Dong-soo declared the firm’s switch into emergency mode on Friday, saying the situation facing the company is “tough.”

The chairman said “domestic and overseas situation facing GS Caltex is tough,” asking for full cooperation of the company’s employees to get over what he described as crisis. He made the remarks during a seminar open exclusively to GS Caltex employees. An attendee told The Korea Times that the chairman looked serious, so did most other participants.

The seminar was held two days after the company announced that it’s looking for some 70 mid-level sales managers who will voluntarily leave the company in return for handsome severance pay and post-retirement benefits. It is the first time in 14 years that the oil company is pushing forward with voluntarily retirement.

Analysts believe GS Caltex’s declining profits are attributable to such cost-saving campaigns. Baek Young-chan, senior researcher at Hyundai Securities, said the firm posted 370.9 billion won ($320.1 million) in operating profits during the first quarter of this year, down 50 percent from the corresponding quarter last year. Baek said the firm’s outlook for the second quarter is also bleak due to the prolonged global recession.

The company also suffers a declining market share, according to the Korea National Oil Corporation (KNOC). In 2008, GS Caltex’s domestic market share of gasoline, diesel and kerosene hovered around 30 percent. But the ratio has declined for four consecutive years to 25.6 percent in the first quarter of this year, the KNOC said.

Such poor performances have spawned rumors that the company will close roughly 100 money-losing gas stations across the country in a desperate cost-saving move.

As of April, GS Caltex owns 624 gas stations, down 20 from last year, according to the Korea Oil Station Association (KOSA). Fierce competition coupled with declining profits caused serial closures of gas stations, a KOSA official said.

In the Friday seminar, an employee vented frustration over the company's increasing expenditure on corporate social responsibility (CSR) activities, despite declining profits.

In answer, Chairman Hur said, "CSR is a critical element to secure the company's sustainable growth. Such activity is a must, not optional." Hur pledged that his firm will uphold the value of CSR no matter how difficult the situation facing the company is.

In the latest in a series of CSR activities, GS Caltex donated a giant entertainment center to the small coastal city of Yeosu last month. Named Yaeulmaru, it stands on 700,000 square meters of land, nestled on the hillside of Mt. Mangma. Renowned French architect Dominique Perrault designed it to strike harmony with the surrounding geographical features.