India accident testing LG Chem's crisis management

Police stand at the gate of the LG Polymers plant following a gas leak at the plant in Visakhapatnam, India, last week. / Reuters-Yonhap

By Baek Byung-yeul

LG Chem's crisis management skills are being challenged following a deadly chemical incident at the company's Indian unit last week.

While the business environment is difficult due to the COVID-19 pandemic, industry officials said how LG Chem manages the chemical accident will become an important factor in consolidating the affiliate's leadership of Korea's fourth-largest conglomerate.

On May 7, a gas leak occurred at the plant of LG Polymers India, an Indian unit of LG Chem, on the outskirts of the Indian city of Visakhapatnam, killing 12 people and sickening around a thousand others. LG Polymers India apologized for the incident announcing measures for victims of the incident.

LG said its initial investigations suggest that the cause of the incident appears to be leaking vapor from a styrene monomer storage tank near the factory and is working closely with the local government and the Korean embassy in India to handle the aftermath. Despite these efforts from the firm, it is inevitable that LG will face a series of lawsuits there.

The National Green Tribunal of India, a special tribunal that can handle issues related to environment protection, already imposed an interim fine of 500 million Indian rupees ($6.6 million), and the Indian police filed homicide charges against the LG Group affiliate, accusing the company of causing the deaths by mishandling the facilities.

For LG Chem, the incident is a huge blunder as the company, which also produces batteries for electric vehicles (EVs), recently rose to the position of top battery maker, edging out Panasonic of Japan in terms of market share.

As it has been a year since the antitrust regulator Fair Trade Commission designated LG Chairman Koo as the leader who controls LG Group, Koo is urged to carefully handle the aftermath of the accident in India. Koo succeeded the leadership at LG from his father Koo Bon-moo who passed away in May 2018.

On the occasion of the first anniversary of the chairman's appointment as the LG leader, industry officials also pointed out that Koo is required to present a vision that can position as the right choice for its investors and customers in the post-COVID-19 world.

Under the new leadership, LG has taken a bold stance in dealing with its competitors.

The legal battle against SK Innovation for battery-making technology could be an example of that. To take the leadership in the lucrative EV battery business, which is considered to be a huge business segment comparable to the memory chip business, LG Chem started a legal battle with SK Innovation over the latter's alleged technology theft.

The tussle will likely end up with SK being defeated as the U.S. International Trade Commission made a default judgment that SK extracted information on a detailed list of anode and cathode materials used for making electric car batteries, from LG Chem employees.

“It is positive that Koo has shown his strong will to ramp up its attacks on rivals but he still needs to present a long-term management vision. He is also urged to focus more on global supply chains during this time of the coronavirus pandemic,” an industry source said.

At the annual shareholder's meeting of LG Corp., the holding company of LG Group, last March, Koo stressed he will focus on risk management during this time of uncertainty sparked by the coronavirus outbreak, maintaining customer value as the group's top priority.

“Due to the spread of COVID-19 across the world, uncertainties in business environments are continuing. But there is an opportunity in every difficulty, so LG will overcome the ordeal and prepare to make a leap forward after the crisis,” Koo told shareholders during the meeting.

Given Koo also emphasized the business group will work on improving corporate citizenship, which refers to a company's responsibility toward society, to become a trusted company for the community, the most important challenge the LG leader is facing is how to handle the chemical incident happened in India.

In regard to the gas leak in India, LG Corp. said it is “paying sharp attention to the aftermath of the incident and its affiliate LG Chem is doing its utmost to remedy the situation.”