It was not too long ago when South Korea’s two biggest conglomerates — Samsung Group and Hyundai Motor Group — were hailed as the country’s high-octane economic engines. Now they’re sources of concern as the nation’s top policy makers struggle to revive growth.
Samsung Electronics Co.’s smartphone debacle and strikes at Hyundai Motor Co. are among factors weighing on the economy, Bank of Korea’s Governor Lee Ju-yeol said on Thursday. Trade Minister Joo Hyung-hwan last month urged Hyundai Motor workers to stop their “unjustifiable” strike, return to work, and help efforts to revive exports.
South Korea’s exports of mobile phones and components plunged 34 percent in September from a year earlier, government data show. That’s when Samsung recalled its flagship Galaxy Note 7 following reports of the new phones catching on fire.
Overseas shipments of cars fell 24 percent the same month, which is when Hyundai’s union workers went on full strike following a series of partial strikes that had disrupted production. The two sectors account for one-sixth of total overseas shipments, which slid 6 percent in September.
Hyundai Motor workers staged partial strikes from July to September, demanding higher pay. The worst labor disruption in more than a decade led to a production decline of about 140,000 cars. Hyundai union workers went back to work earlier this month as negotiations resumed, and the results of a vote on a wage package will be released late Friday or early Saturday. A new strike is possible if workers reject the deal.
Chang Min, head of research at the BOK, said Thursday that the central bank’s updated economic outlook — which was only slightly adjusted — considered the recall but not the end of Galaxy Note 7 production. Chang said that at this stage the BOK does not think the issue will slow the rate of economic growth, although the impact can grow if it damages Samsung’s overall reputation.
Private economists are less optimistic.
Park Sang-hyun, chief economist for HI Investment & Securities Co., expects the sagas at Hyundai Motor and Samsung Electronics to cut fourth-quarter export growth by at least 3.4 percentage points.
Lee Mi-seon, an analyst for Hana Financial Investment Co., estimated that Samsung’s products account for more than 60 percent of South Korea’s mobile phone exports. If Samsung’s mobile phone exports decline by around 30 to 40 percent in each quarter of the next two quarters, it could lower gross domestic product growth in 2017 by 0.15 to 0.2 percentage point, according to Lee.