SK On, Lotte Chemical tighten belts to counter snowballing losses
SK On and Lotte Chemical will take more severe cost-cutting measures to cope with their cumulative losses, which have even had negative impacts on their respective affiliates, both companies said Monday.
The battery manufacturing unit of SK Group decided to freeze the annual pay rates of all executives until it starts making a profit. The company has not turned any profit since its establishment in 2021, unlike the battery subsidiaries of LG and Samsung, both of which started posting operating profits several years ago.
SK On also abolished a chief administration officer’s seat and the position of chief commercial officer, which had been assumed until last month by former Hanon Systems CEO Sung Min-suk, who was dismissed only 10 months after his appointment.
The company's board has been tasked with the decision on whether to allow C-level executives to retain their posts.
In addition, the company ordered its employees to stop working from home, citing the issue of efficiency in its decision-making process.
These measures came two days after SK Group wrapped up its management strategy conference, which was held on Friday and Saturday to discuss the restructuring of the group’s underperforming affiliates.
Even before the conference, SK On had already obliged its executives to fly economy class when traveling overseas on business and to come to the office by 7 a.m., amid the decelerating global demand for electric vehicles and snowballing losses that affected its parent, SK Innovation, and the group’s other affiliates.
“All our executives and employees should know that there is no place to retreat and they must join forces for the best performance,” SK On CEO Lee Seok-hee told company employees after declaring a state of emergency during an executive meeting.
Lotte Chemical's factory in Yeosu, South Jeolla Province / Courtesy of Lotte Chemical
Lotte Chemical also entered emergency mode, Monday, as the petrochemical firm has been suffering operating losses since 2022 and its credit risks have begun to affect the group’s holding firm.
The company decided to ban its employees from using mobile messenger services for private purposes and from leaving their stations to smoke from 10 a.m. to 12 p.m. and from 2 p.m. to 4 p.m.
Read More
In addition, it plans to rely more on teleconferences and limit the number of employees going on each business trip to two, to reduce its budget for business trips by 20 percent. Its executives have also been ordered to choose lower-class plane seats when traveling on business, if their flights are less than 10 hours in duration.