Asia/Pacific News
Report: 44% of Korean Shipping Firms Could Go Under
Close to half of South Korea's shipping companies are in danger of insolvency, but many could survive with aggressive measures, says Al Koch, vice chairman of global consulting firm AlixPartners.
Koch, who led General Motors' 2009 restructuring efforts in the U.S., spoke recently at the 2013 Asian Leadership Conference.
An analysis of 1,400 South Korean companies by AlixPartners found that shipping was the industry with the highest portion of companies in danger, 44 percent, followed by construction at 35 percent.
"Korea and Korean industry today face many of the same problems that General Motors faced prior to its turnaround – high debt, slow growth and seemingly intractable long-term structural issues, some of them culturally oriented," Koch said.
"However, just as GM, working in concert with the U.S. government, was able to reexamine past orthodoxies as part of its turnaround, I'm confident that Korea and Korean companies can reexamine their own past orthodoxies to do the same."
AlixPartners said "ingrained business norms," including reluctance to take decisive actions, have led to the creation of zombie companies.
"In today's environment, Korean companies hoping for renewal only by cutting costs and headcounts, expecting to solve all their financial problems with just that, are merely pacing zombie-hood or even a slow death," said Yung Chung, managing director at AlixPartners and head of the firm's operations in South Korea.
"Companies need to simultaneously undertake operational as well as financial actions, a holistic approach, to survive and prosper today."
In September, the South Korean shipping industry called on the nation's government for support in the face of financial losses by most firms in the market.
