Major conglomerates set up contingency plans, prepare for worst-case scenario

Thousands of shipping containers are on standby to be exported at the Busan harbor. Yonhap

By Kim Hyun-bin

A number of conglomerates are setting up contingency plans preparing for the worst-case scenario as uncertainties are mounting, including rising inflation, interest rate hikes, lockdowns in China and the war in Ukraine.

Hanwha Solutions, Hanwha Energy, Hanwha Impact, and Hanwha Total Energy's petrochemical and energy business divisions held a meeting, Thursday, to review management issues arising from the global economic uncertainties.

The Hanwha CEOs decided to take preemptive countermeasures, based on the fact that crisis factors such as rising oil and other raw material prices, supply chain and logistics disruptions, and rising interest rates still exist.

"We will closely monitor global energy prices, including oil prices, and supply chain disruptions, and establish an emergency plan through stress tests so that we can respond flexibly to the rapidly changing international situation," Hanwha Solutions CEO Nam Yi-hyeon said.

Last month, Hyundai Heavy Industries (HHI) Group also convened an emergency meeting of its CEOs to respond to the global uncertainties.

"The future crisis may be different from what we have experienced so far, so thorough preparation is necessary by considering even the worst-case scenario and preparing countermeasures," HHI Group Chairman Kwon Oh-gap emphasized.

Rising raw material prices and increasing labor costs have been slashing profits. "The pressure of rising material costs will increase in the second quarter more than in the first quarter," Kia said in a conference call.

Hyundai Motor Group has recently established emergency plans in response to uncertainties in the global business environment and is setting up strategies. Other major groups, such as Samsung, LG, SK, Lotte, POSCO and HHI, are reported to have taken an internal emergency response to minimize the cost burden and speed up the strengthening of new growth areas.

Hyundai Motor's automobile sales in Russia in the first quarter also decreased by 25 percent compared to the previous year due to the impact of the Ukraine crisis, and local production and parts supply problems have also continued. Accordingly, it has also set a policy to minimize losses in terms of liquidity by reviewing planned investments this year and delaying the launch of new vehicle models.

Concerns are also growing about the sluggish demand for export products due to the lockdowns in parts of China. The electronics industry was expecting an increase in demand for information technology (IT) products such as home appliances and smartphones in China but that took a downturn. Moreover, domestic companies with local factories are still experiencing considerable difficulties in procuring parts.

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