Some 20 subsidiaries of the South Korean big five industry conglomerates are to be axed following the publication of a far- reaching hit list by the government-backed Financial Supervisory Commission. The five conglomerates, or chaebols: Samsung, Hyundai, Daewoo, LG Electronics and Sunkyong Electronics, have each been told to issue closure orders for a number of companies within their groups. Samsung has been told to axe four companies including Iechon Electronics and its wristwatch making subsidiary. Hyundai will also have to cut four companies, including its aluminum and heavy industry divisions. Daewoo, with five closures on its list, will lose Orion Electronic Components and Korea Industrial Electronics. LG Electronics will be forced to close its electronics components subsidiary and Sunkyong Electronics will have to axe three companies. The publication of the hit list comes after months of increasing pressure on the big five by the Korean government. The government, through its Financial Supervisory Commission, has been urging the five conglomerates to analyze their subsidiaries, typically around 20 to 30 for each family, and cut off those companies only existing through emergency bank loans. But a lack of action lead the commission, in June (CI, No 3425), to get heavy on the chaebols and force them to co-operate with the banks to come up with a list of what it called their non-viable subsidiaries. This list, which also includes 35 companies belonging to other conglomerates, was finally published by the commission’s chairman, Mr Lee, on June 18. A spokesperson for the Korean Embassy in London said the chaebols would have to liquidize those companies on their lists sooner or later although he couldn’t give an exact timeframe. He added that this was the first round of closures and that others could be expected in the future. He said the aim of the closures was to help the conglomerates focus on their core business, improve their capital structure and increase accountability to the companies’ major shareholders.
