Major domestic companies are facing a 'complex crisis' as geopolitical risks originating from the Middle East, along with high exchange rates and high oil prices, have persisted for over a month. Even LG Electronics (066570), which posted operating profits approaching 1.7 trillion won in the first quarter of this year, has declared emergency management. With the refining, petrochemical, and aviation industries also entering emergency management mode, there are concerns about declining investment and consumption due to economic contraction. To make matters worse, Samsung Electronics (005930) and POSCO face concerns over competitiveness damage from labor-management conflicts, heightening tension across the business community.
According to business circles on the 10th, LG Electronics ordered organizational leaders to enter emergency management mode in the second quarter and has begun intensive cost efficiency measures.
Specifically, the company has established a principle of executives flying economy class instead of business class for overseas trips, and domestic business trips will be replaced with video conferences whenever possible considering energy conditions. Trips not directly related to business will also be restricted. Expenses for executive-level organizational leaders will be cut to half of previous levels. Welfare benefits for regular employees will be maintained at existing levels to prevent morale decline.
LG Electronics' austerity measures were implemented amid forecasts that this year would exceed its all-time best performance. This is interpreted as the rapid growth of external variables including rising logistics and raw material costs due to the prolonged Middle East situation and global economic contraction. An industry official conveyed the atmosphere, saying "If the aftermath of the geopolitical crisis continues into the second half, the possibility cannot be ruled out that LG Electronics' operating profit forecast for this year, which was expected to exceed 4 trillion won, could be damaged." LG Electronics set all-time records in the first quarter with sales of 23.733 trillion won and operating profits of 1.6736 trillion won, driven by the successful establishment of home appliance subscription services and growth in the automotive components business.
The situation is also challenging for the automobile and petrochemical industries. Earlier this month, Kia (000270) experienced temporary disruptions in parts supply due to the Iran situation, resulting in 'empty running' of conveyor belts on some production lines. The petrochemical industry has effectively maintained a constant emergency posture through raw material supply diversification and capacity utilization adjustments amid years of structural recession, while the shipping industry is also struggling as logistics costs and insurance premiums soar due to concerns over Hormuz Strait blockades.
The aviation industry, hit directly by high oil prices, is staking everything on cost efficiency. Full-service carriers (FSC) including Korean Air (003490) and Asiana Airlines (020560) have entered emergency management, while low-cost carriers (LCC) are significantly reducing unprofitable international routes.
The 'spring labor offensive' that has begun in earnest amid external adversities is another factor adding to management uncertainty. Samsung Electronics' record performance of 57 trillion won in operating profits in the first quarter alone has ironically become a spark for labor-management conflict. The joint struggle committee including the National Samsung Electronics Union is demanding performance bonuses of approximately 37.5 trillion won based on this year's results, and as management cannot accept this, concerns about production disruptions are growing with a general strike threatened for May.
POSCO faces the risk of so-called 'fragmented bargaining,' having to conduct individual negotiations with around four unions each year after the Gyeongbuk Regional Labor Relations Commission upheld subcontractor unions' requests for separate bargaining following the implementation of the 'Yellow Envelope Law' (revised Trade Union Act).
The shipbuilding industry, which is enjoying a boom period, also carries the seeds of conflict with subcontractor unions stemming from the Yellow Envelope Law. Hanwha Ocean is experiencing difficulties as subcontractor unions have announced a general uprising demanding negotiations with the prime contractor, and multiple unions have been established for the first time in 39 years. HD Hyundai Heavy Industries and Samsung Heavy Industries have no immediate clear strike movements, but tense labor-management relations prevail ahead of upcoming wage negotiations.
A business community official explained, "Management uncertainty is rapidly increasing due to labor-management conflicts in addition to external variables," adding that "amid the global complex crisis, concerns are growing over damage to corporate and national competitiveness due to labor-management conflicts."
