LG cuts costs to stay up in downturn

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LG has vowed to cut costs but not necessarily at the expense of jobs as it joins a long list of companies trying to battle against the harsh winds of the economy.

The commitment to its investment in people was given this week as the company outlined its long-term business plan and economic survival strategy.

LG hopes to shave KRW 3 trillion (£1.5 billion) during 2009 through manufacturing and indirect costs. At the same time, the company may also spend more money on core assets such as research and development (R&D), marketing, branding and design as it seeks to innovate its way out of the downturn.

“Every company – not just LG – has been affected negatively by the economic downturn,” said the company’s chief executive Yong Nam in a statement. “The poor performance of many global companies in the last quarter of 2008 was a wake-up call that we needed to take drastic actions, not just safe ones.”

The company promised to enhance its HR system and recruit and retain a global pool of talented individuals. However, in a press conference earlier in the week, Nam did hint at possible overseas headcount reductions.

"LG may have to cut down on the number of jobs in our overseas affiliates,” he was reported as saying by the Korea Times.

LG’s business has been re-organised to focus on long-term growth and profitability and the company has also created a so-called Crisis War Room (CWR) which unites its business units, head offices and executives to execute its business plan. Since the CWR’s creation at the end of last year, a number of key actions have already been identified.

“These initiatives will enable LG to improve both growth and profitability over the long-term, regardless of the economic climate,” Nam added.

“Becoming a stronger global brand will be a natural outcome of this effort.”

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