Export Outlook Gloomy for Key Industries
By Kim Hyun-cheol
Staff Reporter
The aftermath of the current global financial crunch is showing signs of a vicious chain reaction, leading to shrinking investments and domestic consumption in advanced countries, and to slumping exports for Korean businesses.
Predictions for the Korean economy, which relies heavily on exports, are even gloomier for next year as the ongoing crisis worldwide is expected to worsen. Major shipping destinations such as the United States and China are likely to tighten their purse strings, deterring Korean firms from fixing their 2009 production plans.
Autos, steel production and shipbuilding are some of the hardest hit by the slowdown. Despite a decent showing by Hyundai-Kia, most other automakers here are suffering as both domestic and overseas markets decline.
Ssangyong Motor last month allowed nearly 350 workers to take paid leave in an effort to cut costs as sales plunged, as loss making continued for the Korean unit of China's Shanghai Automotive Industry Corp.
The carmaker had originally planned to sell 141,800 vehicles this year, but sales in the first nine months of the year stood at only 66,793, down 30.2 percent from the previous year. For the third quarter, the maker posted an operating loss of 48.3 billion won ($34.7 million).
Now Ssangyong is offering voluntary retirement to employees, and has reduced next year's production goal to 90,000, down from this year's 130,000. It will decrease production from early next year.
GM Daewoo will suspend the operation of its three plants for about two weeks from Dec. 22, as well as delaying the scheduled introduction of some new products next year.
``The company will postpone launching two of our new models originally slated for next year to 2010.'' Josef Edlinger, GM Daewoo's vice president of sales, said Thursday.
Even Hyundai-Kia predicts a tough year in 2009. ``The `evil triangle' of slumping demand, an economic slowdown and shrinking auto finance is likely to go on in the global automobile industry throughout next year,'' a Hyundai executive said.
Steel makers have already started to cut production, with some even slashing product prices to dispose of stock.
Hyundai Steel and Dongkuk Steel have recently reduced their production in the build-up to an overall markdown. Dongbu Steel is also planning a 100,000-ton cut in cold-rolled coil production in the last quarter of the year.
POSCO, the nation's largest steel maker, is not planning the same measures, except for stain-less steel products, the supply of which has been on adjustment since late last year.
Builders Staggering on Land, Sea
Good times seem to be over for shipbuilders and constructors, with orders plummeting from the second half. What is worse for ship makers is that the trend is strengthening bipolarization in the industry ― a tailspin for small- and mid-sized builders and a boom for larger rivals.
Giants like Hyundai Heavy Industries, Samsung Heavy Industries, Daewoo Shipbuilding & Marine Engineering and STX have more leeway thanks to securing orders for the next several years.
Smaller firms, however, are in danger of bankruptcy as shipping companies continue to cancel earlier orders. In a recent case, C& Heavy Industries was unable to construct ships that had been ordered for this year, facing rumors that it's close to bankruptcy.
Thanks to the boom earlier in the year, most construction companies are set to post profits at the end of the year. But that doesn't mean they will get away completely.
A lot of Middle East countries have put their building projects on hold, as global oil prices have fallen to around $50 per barrel after hitting over $140 earlier this year.
Hyundai Engineering & Construction lowered its year-round goal to $7 billion, down from over $8 billion expected earlier in the year.