 |
| From left, Samsung Electronics Vice Chairman Lee Jae-yong, Hyundai Motor Group Executive Vice Chairman Chung Euisun, LG Group Chairman Koo Kwang-mo and SK Group Chairman Chey Tae-won |
By Nam Hyun-woo
Samsung, Hyundai Motor, SK, LG and other domestic conglomerates are coming up with emergency management measures to deal with the impact of the COVID-19 pandemic on their profitability.
The companies have so far employed protective measures for their workers, but are now looking to the industrial fallout from the outbreak as it is sure to cause problems for their manufacturing bases and supply chains, industry officials said Monday.
SK Group Chairman Chey Tae-won will hold a meeting with unit CEOs this week to come up with strategies to contain the impact of COVID-19.
Though SK Group officials said they are yet to decide the exact schedule and participants in the meeting, the heads of SK Innovation, SK hynix and other core units are expected to attend.
Industry officials said the main topic of the meeting will likely be SK Innovation, whose main business is refining, petrochemicals and rechargeable battery production.
SK Innovation is expected to post an operating loss of up to 800 billion won ($625.3 million) in the first quarter of this year due to plunging oil prices.
"Despite the plummeting demand for oil products amid the COVID-19 outbreak, major oil producing countries have failed to cut production, and this has led global oil prices to nosedive," Yuanta Securities analyst Hwang Kyu-won said. Hwang predicted that the company will likely see a 733.7 billion won operating loss in the first quarter while its annual operating profit will be 38.8 billion won, down 97 percent year-on-year.
For SK hynix, the group's semiconductor affiliate, the priority is to ensure its memory chip supply chain keeps functioning, as semiconductor processing equipment firms in Europe and the U.S. have shut down their plants.
Hyundai Motor Group is also in emergency mode due to setbacks in operating its plants abroad. Since March 27, employees of the group have been working from home to prevent the spread of the virus, but most returned to their offices Monday after a number of overseas plants shut down.
According to the group, a Hyundai Motor plant in Chennai, India, ceased operation after the Indian government issued an order to shut down businesses in 75 cities by March 31.
Affiliate Kia Motors' plant in Andhra Pradesh was not included in the affected cities, but the group said the plant is preparing for a potential shutdown.
Prior to this, the Hyundai Motor Group decided to shut down a Hyundai Motor plant in Alabama from March 18 to March 31 and a Kia Motor plant in Georgia from March 19 to March 31, after an employee at the Alabama plant was confirmed to be infected with the virus.
Their European plants ― Hyundai's in Czech and Kia's in Slovakia ― will also cease operations for two weeks starting Monday.
Samsung Electronics and LG Electronics are facing shutdowns in their smartphone and home appliance plants in India. Samsung has also halted operations at its Slovakian plant that produces televisions.
Samsung's Indian plant is the company's largest smartphone manufacturing facility, capable of producing 120 million phones a year.
During a visit to its domestic display manufacturing facilities last week, Samsung Electronics Vice Chairman Lee Jae-yong said: "Unexpected internal and external variables are putting pressure on Samsung but we should not stop."
"As the fallout of coronavirus looms, companies are now viewing this as a matter of their survival," a conglomerate official said. "So far, companies have been focusing on employee safety, but it is now about their corporate fundamentals."
