Major Companies ``Structure Improvement, Rather Than Size``

As stagnation of economy continues on, major groups are focusing on `tuning the structure in terms of the quality` selling their less profitable divisions.

According to the business circle, during the first half of this year, significant number of major companies have improved their financial structures focusing on storing more cash by selling their assets and inviting foreign capital rather than investment. The business circle is forecasting that for the second half of the year, companies will continue to focus on conservative administration insuring substantiality due to the opaque economic prospect.

# Adjustment on less-promising business through dividing, integrating, closing, and selling off divisions = Samsung and LG, the first and second ranking groups in the circle, led the atmosphere of structure adjustment selling or dividing their now-profitable, but less-promising divisions.

Samsung Electro-Mechanics Co. decided to cut the staff from current 13,000 to 10,000 as they divide or sell divisions including the set-top box division. Samsung SDI Co. reduced 750 employees transferring two Braun tube production lines from its Suwon factory to China. Samsung General Chemicals Co. cut in the staff from 1,300 to 1,100 and Samsung Engineering Co. also reduced 5 percent of the number of high-ranking staffs, 60 people, in the means of the voluntary retirement.

LG Household and Health Care Co. sold off its sugar-alcohol division’s domestic business right and the entire stocks of its factory in China to the French Rocket Co. LG Chemical Co. sold off the domestic business right and Tianjin subsidiary factory’s stocks of its powder coating business at 33.7 million dollars. LG Electronics Co. has founded a Braun tube joint-venture company, LG-Philips Display Co., on July lst, receiving 1.1 billion dollar cash. LG International Co. is also looking for buyers of its own stocks of LG Micron Co. and LG Energy Co.

SK Telecom Co., the flagship company of the SK group, decided to focus on the wireless communication business selling off its cable communication business. SK is negotiating to sell off its 14.5 percent stock share of the SK Telecom Co. with NTT Docomo of Japan.

Hyundai and Kia Motor Companies have integrated their research and development divisions and material divisions to improve the synergy effect.

Among mid-size groups, Hyosung has closed its lumber business, and Kolon has divided the Kolon Industry Ltd.’s water purifier division. Kumho has merged its Kumho Petrochemical Co. and Kumho Chemical Co. last January, and Kumho Merchant Bank and Kumho Capital Co.

# `Sparing oneself` conservative administration for the second half of this year = Samsung has reduced the scale of investment from 9.5 trillion won to 8 trillion won as the profit from its electronics division decreases due to the price drop of the semiconductors.

Samsung Electronics Co. decided to postpone to next year its major facility expansion projects including the semiconductor production line in Asan factory in Asan City, South Chungcheong Province. The company has decided to focus on facility maintenance, research, and development.

LG that had determined to invest 6.7 trillion won this year decided to invest as planed, but will hold investment on the businesses with less-priority if the economic stagnation continues on.

SK also reduced the amount of its investment from 4.6 trillion won to 4 trillion won, and so did Posco from 2.4 trillion to 2 trillion.

Park Won-Jae parkwj@donga.com