Samsung Electronics and Hyundai Motor, South Korea's largest companies, told employees to brace for intense competition in a weak global economy as the government called for contingency planning.
"South Korea's economy is facing increased uncertainties this year, and the global economy may rapidly deteriorate if the European debt crisis worsens," Finance Minister Bahk Jae Wan said in a New Year statement released yesterday. "Contingency plans to prevent contagion from Europe's crisis should be strengthened."
Exports from Asia's fourth-largest economy may grow 6.7 per cent in 2012 from 19.6 per cent in 2011, according to government forecasts. Security risks from a leadership change in North Korea are adding to uncertainties for the South as European leaders struggle to hold their monetary union together in the face of credit downgrades and a looming recession.
"The global economy's low-growth trend will continue and uncertainty surrounding the business environment won't be easily removed," Samsung chairman Lee Kun-hee said, according to a summary of a speech to employees yesterday that was distributed by the company. "We should make our corporate culture more open, flexible and innovative."
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The maker of televisions, computer chips and mobile phones and affiliated Samsung Group companies had combined sales in 2010 equivalent to one-fifth of South Korea's gross domestic product.
South Korean President Lee Myung-bak yesterday said he would focus in the coming year on reducing inflation and bringing down unemployment by investing over 10 trillion won (Dh31.5 billion) in creating jobs. The government's goal is to get inflation down to the low three-per cent range, he said. Consumer prices rose 4.2 per cent in December.
"The auto industry in 2012 is expected to show slow growth and intense competition between companies," Chung Mong-koo, chairman of Hyundai and its affiliate, Kia Motors Corp., said yesterday in a New Year speech to workers in Seoul.
The carmakers will focus on improving quality and the image of their brands as they seek to increase global sales by 6.1 per cent this year to a combined seven million vehicles.
"Compared to the last two years, the growth target is conservative," said Park In-wWoo, an analyst at LIG Investment and Securities Co. "This may come from the grim economic outlook, but more so, Hyundai is planning to take this year to focus on internal management such as quality control."
Demand for Hyundai's Sonata sedan and Kia's Sportage sports utility vehicle helped the companies boost global sales in 2011 as Japanese rivals were hampered by a strong yen and suffered from production disruptions after the March quake and record flooding in Thailand.
Hyundai shares fell 1.4 per cent to 210,000 won in Seoul while Kia declined 0.8 per cent. Samsung rose 1.4 per cent to 1,073,000 won.