Nam Hyun-woo has worked as a staff writer at The Korea Times since 2013, mostly covering business and politics. He currently belongs to the Business Desk where he covers topics such as emerging tech, AI, ICT and Korea's chaebol community. Prior to joining the team, he was the paper's correspondent for the presidential office of Korea during the Yoon Suk Yeol and Moon Jae-in administrations.
Mando to dismiss workers on falling sales
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By Nam Hyun-woo
By Nam Hyun-woo
Mando CEO Chung Mong-won
Korea's No. 2 auto parts maker Mando has launched mass layoffs of its executives and employees, as its main clients Hyundai Motor and Kia Motors' China sales plunge, according to the company, Wednesday.
Industry analysts said the company's downfall was long overdue because of its high reliance on the two brands, but the company failed to lower its dependency and expand its client base, while costs for developing advanced technologies were rising.
Mando said it would slash the number of executive posts by more than 20 percent and accept applications for year-end voluntary retirement.
This comes after more than 20 senior executives resigned on Monday, including Chief Operating Officer Song Bum-suk.
“We are facing a stern crisis and we cannot guarantee growth this year,” Mando CEO Chung Mong-won said in a statement. “We had no option but to introduce a job cut for the survival of the company.”
Mando posted 5.87 trillion won in sales in 2016, but the number contracted to 5.67 trillion won last year. During the same period, its operating profit also decreased by 35 percent to 197.4 billion won from 305 billion won.
In the first quarter of this year, Mando logged 1.42 trillion won in sales, up 5.1 percent from a year earlier, but its operating profit declined by 25.9 percent to 32 billion won during the same period.
Analysts expect Mando's slump will continue in the second quarter of this year. IBK Investment & Securities analyst Lee Sang-hyun anticipated the company's sales will grow by 5.7 percent year-on-year to 1.5 trillion won in the second quarter but operating profit will contract by 25.1 percent to 49.7 billion won during the same period.
“China highly contributed to the company's total sales in the past, but Hyundai Motor Group brands' slump in China and the U.S.-China trade conflict has increased the company's uncertainties,” Lee said.
Hyundai Motor sold 1.74 million vehicles in the first half of this year, down 7.6 percent from a year earlier. The company attributed the decline to sales plunges in China and Turkey. Kia Motor also suffered a 0.8 percent decline during the same period.
Amid the sales drop, Hyundai Motor closed its Beijing Hyundai Motor Company Plant 1 in April and Kia Motors leased a plant in China to its Chinese joint venture partner.
As its main clients struggle in China, Mando has been trying to lower its reliance on Hyundai Motor Group, but failed to do so. According to the Financial Supervisory Service, Hyundai Motor Group sales accounted for 58 percent of its total revenue last year, up from 56 percent in 2017.
Another factor weighing down Mando is the car industry's fast transition toward electric vehicles and self-driving cars.
“Not only Mando but also others should have prepared for the paradigm shift in the auto parts industry promptly, but they seem to be lagging behind global rivals,” a car firm official said. “Since they have to expand their R&D spending for a while, difficulties among auto parts companies will deepen in the future.”