Conglomerates shift to emergency mode as epidemic prolongs

Hyundai Motor Ulsan plant. Hyundai lost 12.7 percent in global sales for February compare to same period last year, as the coronavirus has impacted key export regions such as China, U.S. and Europe. / Yonhap

By Kim Hyun-bin

Major conglomerates are switching to emergency management mode and reevaluating their initial business plans for the year to minimize losses caused by the fallout from the COVID-19 outbreak, industry official said Friday.

The move comes as the spread of the novel coronavirus seems to be showing no signs of abating with hundreds of newly confirmed patients being reported daily, nationwide.

Experts are calling for companies to set up new strategies to brace for worsening profitability as Korea's key trading partners, including China ― which takes up to 25 percent of local firms' overseas sales ― the United States and European countries are also fighting the spread of the virus.

Companies are also scrambling to come up with measures to compensate for the decrease in local consumption on top of the reduction in demand for exports.

Hyundai Motor is among the conglomerates that has suffered the most from COVID-19 infections, as it had to halt operations at its Chinese factories in the initial stages of the outbreak.

Many experts believe the automaker will be unable to meet its sales goal of 7.53 million cars for 2020, even though the number is around 70,000 lower than last year.

The company's global sales for the month of February dropped 12.9 percent with only 275,000 vehicles being exported.

Just in China alone, the firm is highly unlikely to achieve its annual target after February sales tanked 95 percent compared to 2019.

"Hyundai Group's global sales for February were poor …. due to the coronavirus as they were unable to receive supplies and components from China," said Lee Sang-hyun, an analyst at IBK Securities. "If there were no production delays and we were in a normal state, Hyundai and Kia motors would have been expected to see a 12.4 percent and 16.8 percent increase in sales."

Chung Eui-sun, executive vice chairman of Hyundai Motor Group, sent an e-mail to Hyundai Motor employees, Tuesday, to address the current situation and emphasize the company was doing its upmost to minimize losses and maintain administrative stability.

"The temporary setback in operations was inevitable, but we are setting up diverse countermeasures and plans to overcome the crisis and are working to find administrative stability," Chung wrote.

Tech giant Samsung Electronics is also expected to suffer losses due to the coronavirus as it is unlikely to reach its sales target for the Galaxy S20 series, which was officially released worldwide Sunday.

According to telecom companies, combined pre-orders for the smartphones were only 70 percent to 80 percent of those for the previous Galaxy S10, which was released in August.

The virus also hindered production, as the company's only smartphone plant in Gumi, North Gyeongsang Province, had to temporarily close after four workers there were confirmed to have COVID-19.

LG Group is planning to postpone new recruitments. Last year it held a mass recruitment in April, but this year it has not even posted a recruitment notice. LG Chemical which was supposed to post a recruitment notification early this month has postponed it until April.

SK Group is developing contingency plans for its semi-conductor and oil refining affiliates with the latter under SK Energy reducing operating rates to 85 percent.

"The group has launched a special center to monitor the virus situation and come up with countermeasures. Six to seven of our affiliates are having their employees work from home, while others have customized emergency management to better suit their operations, such as diversifying work times to avoid congestion and rush hours, and separating team members to work in other locations," an SK Group official said.

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