Beleaguered Korea Inc. begins to shave payroll

Korean Air to cut 100 jobs, Hana Bank, SC First opt for early retirement schemes

By Kang Seung-woo

The global economic gloom is pushing Korean companies to massively cut their workforce.

Some have already started laying off their employees, while others are on the verge of enforcing early retirement programs to slash costs and streamline their business portfolio.

Industries such as aviation, construction and finance have given the pink slip to a portion of their employees.

Despite the economic slump, however, steel, shipbuilding and distribution are some safe havens removed from the job cutting.

Korean Air, the nation’s largest air carrier, has cut around 100 jobs via a voluntary retirement program aimed at increasing its efficiency.

In the third quarter of this year, Korean Air recorded a net loss of 524.3 billion won ($461.9 million) due to soaring fuel costs, weakening local currency and a Japanese earthquake in March.

The voluntary retirement scheme, the first such action in five years, affected high-paid, mid-level officials who have worked for 15 years or longer, the company said. But flight attendants and employees overseas were not included.

Although Asiana Airlines has announced no layoff plans, there is still a chance the company will do so if the economy worsens, market watchers estimate.

The nation’s once-booming property market has yet to see any sign of recovery, with local builders likely to cut jobs.

Major construction companies remain intact by going global on the back of the strong export of plants, but small- and mid-sized entities are under pressure to reduce their payroll because they do not have the technology to go abroad and are heavily dependent on the local market.

“Several constructors, including Byucksan Engineering and Construction and Sambu Constraction, have either begun taking voluntary retirement from employees or been planning staff cutbacks,” said an official of the Korean Federation of Construction Company Union (KFCCU).

“Large builders are increasing their personnel after winning overseas contracts, while smaller ones are expected to continue facing a tough situation for the present time. It is inevitable for them to slash their workforce,” said a Seoul-based economist.

According to the industry, a large number of smaller construction firms plan to operate with the minimum number of staff and working from home and paid leave are under consideration as well.

In the financial industry, personnel restructuring is already in progress.

Hana Bank, the banking arm of Hana Financial Group, carried out voluntary retirement of 378 employees in September by paying them salaries equal to 34 months.

In addition, more cutbacks are forecast if the nation’s fourth-largest financial services company successfully takes over Korea Exchange Bank (KEB).

Hana Financial, which agreed with Texas-based Lone Star Funds to buy KEB in November last year, is waiting for the financial regulator’s verdict on whether to order the buyout fund to dispose of its 51.02 percent stake in KEB via punitive measures.

SC First Bank, the Korean unit of Standard Chartered, announced last month its layoff plan for executive employees in a bid to boost its management efficiency and 90 of senior officials applied for an early retirement program as of Nov. 1, according to the bank. It was the first time for the British banking group to implement an early retirement program on executive-level staff since it was established in 2005.

Woori Bank, which plans to spin off its credit card unit next year, is also considering a staff reduction.

Seven savings banks, whose businesses were suspended due to poor asset quality in September, are on auction and when their merging process ends, their employees are expected to be dismissed to a certain degree.

Despite the global economic turmoil, there are a few sectors withstanding sweeping job cuts, as they put up solid numbers in earnings or need to recruit manpower for new investments in facilities.

As the shipbuilding industry showed strong performances and largely outsources its labor force, there is little room for staff reduction.

Hyundai Heavy Industries, Daewoo Shipbuilding and Marine Engineering, Samsung Heavy Industries obtained large orders in offshore facilities and recorded considerable earnings in building large container ships.

The steel industry has shown tepid results this year, but there is no indication of layoffs.

Large steelmakers POSCO and Hyundai Steel maintain a certain level of operations at their steel mills and new facilities require more manpower.

POSCO, the world’s third-largest steel company, slashed its planned spending on facilities and acquisitions for this year to 6 trillion won from the previously set 7.3 trillion won, citing economic uncertainties, but cutting jobs is not among its options.

“Since establishment in 1968, POSCO has never carried out personnel restructuring. We see job cuts as the last resort in cost reduction and don’t really consider it an option,” said an official of POSCO.