Go to contents

A Cold Wave of Restructuring

Posted November. 22, 2004 23:16,   


Cold Wave Hits Industrial World-

The recent layoff is taking precedence in exporting industries such as the chemical fiber industry, which are greatly influenced by the fluctuation of the exchange rate.

The Kolon Group decided to reduce around 40 percent of its executives by the end of this year, including presidential authorities. Such a plan of the Kolon Group is the largest in scale since the foreign exchange crisis.

Huvis, which is a chemical fiber company, has recently set an internal policy to lay off thirty percent of its 2,000 employees from plants in Jeonju of North Jeolla province, Suwon of Gyeonggi province, and Ulsan.

Heavy industries, which are highly dependent upon exporting, are also in the midst of restructuring. Rotem, which is a subsidiary company of Hyundai Motor Group also cut back 350 employees among their 1,550 management level employees in the beginning of this month. Also, the shipbuilding world, including Hyundai Heavy Industries, is considering a reduction among their employees.

In addition to that, Samsung Electronics executed early retirement for some of their employees while recently uniting their home appliances department into the Gwangju plant. This wave of restructuring is also not an exception for small and medium companies. In particular, a phenomenon of a decrease in manpower in domestic business is occurring as companies are moving their production bases overseas due to the sudden drop in the exchange rate.

Kim Young-soo, the president of Marjo Industries Co., which is an apparel exporting company, said, “We decided to move our production base to China for cost reduction,” and added, “If we do not order apparel processing in Korea, then the production of the existing supplier is inevitably curtailed.”

Restructuring For Financial Circles-

The Korea Exchange Bank decided to lay off a total of 900 of its employees this year and received its first application for voluntary retirement during October 19 to 22. Those who were eligible were employees who have worked more than five years and above the assistant manager position. As only 350 employees applied for voluntary retirement, the Korea Exchange Bank held a second additional application receiving application from 150 employees and also assigned 200 employees to “special business teams”, separately, taking retirement measures de facto.

The securities industry, which is in a desperate battle due to aggravation in gains, has also set forth on a restructuring plan, and 1,757 employees have left their job during this year among 57 securities employees. Also, the number of offices, including all the head offices and branch offices, which were 1,624 at the end of last year decreased to 1,541 by the end of September.

“It Is Rather Fortunate If Restructuring Is Possible”-

There are indications that some big companies are not able to correspond with flexibility, although they are absolutely in need of a layoff, because of the labor union.

In the case of Hyundai Motors, they cannot even conceive of the idea of restructuring because they have stated in a collective agreement that says, “The company is unable to layoff a permanent employee unilaterally due to economic stagnation without discussion with the labor union.”

Also, Kia Motors has attempted to execute a measure of relocating employees in sales positions to production in order to cope with the recent domestic stagnation, but as the labor union strongly resisted, the plan itself became scrap.

Concern For Aggravation Of Vicious Circle Along With Economic Stagnation-

Considering that the economy has worsened due to the large-scale layoffs after the financial crisis, concerns are rising that the depression will become worse in case this restructuring becomes more widespread.

Moreover, there are indications that a serious emergency situation may occur as estimations are showing that all economic conditions will aggravate; at least the exporting economy was good due to favorable conditions abroad, such as the rise in exchange rate (sudden drop in the value of won) after the financial crisis.

Professor Seo Seung-hwan from Yonsei University said, “It is in doubt whether the Korean economy will be able to endure next year, which will not be good due to various economic conditions, plus the drop in exchange rate.” and interpreted, “The restructuring of corporate departments is a measure which reflects such reality.”

Economic experts are emphasizing that a fundamental change in the policy is urgent by saying, “In times when the government policy doesn’t seem to focus on ‘reviving the economy,’ the companies cut back production and manpower as measures to cope with the uncertainty of the future.”