South Korea growth slows on crises at Sam­sung and Hyundai

The Myanmar Times - - International Business -

A MAS­SIVE re­call of Sam­sung smart­phones and strikes at Hyundai Mo­tor took a toll on South Korea’s econ­omy in the third quar­ter, with the slow­est growth in more than a year.

Asia’s fourth-largest econ­omy ex­panded 2.7 per­cent on-year in July-Septem­ber – the weak­est pace since the sec­ond quar­ter of 2015 – the cen­tral Bank of Korea (BOK) said.

“Growth in man­u­fac­tur­ing slowed con­sid­er­ably as halted pro­duc­tion of Sam­sung’s Galaxy Note 7 and strikes at Hyundai Mo­tor hit over­all pro­duc­tion, con­sump­tion and ex­ports of the auto and smart­phone in­dus­tries,” said Chung Kyu-il, a BOK di­rec­tor.

“Losses linked with the Note 7 ... may have fur­ther im­pact on the fourth-quar­ter growth as well,” he said. The BOK es­ti­mates this year’s growth out­look at 2.7pc.

Sam­sung – the world’s top smart­phone maker and the South’s big­gest firm by value ac­count­ing for about 17pc of GDP – an­nounced the re­call of 2.5 mil­lion Note 7s af­ter reports of the de­vices catch­ing fire.

When re­place­ment phones also started burn­ing up, the com­pany opted to take a multi-bil­lion-dol­lar profit hit and scrap the high-end smart­phone al­to­gether.

Tens of thou­sands of work­ers at Hyundai – the South’s top au­tomaker – staged full or par­tial strikes for sev­eral weeks through July to Oc­to­ber de­mand­ing higher wages.

The firm es­ti­mated the loss caused by the ac­tions at more than 3 tril­lion won (US$2.6 bil­lion).

South Korea has been strug­gling to keep its econ­omy afloat as it is buf­feted by the global eco­nomic slow­down, with the cen­tral bank keep­ing its key in­ter­est rate at a record low in a bid to spur do­mes­tic spend­ing.

The BOK ear­lier this month cut the coun­try’s growth out­look for 2017 to 2.8pc from 2.9pc, hav­ing con­sid­ered the po­ten­tial im­pact of the Sam­sung’s re­call cri­sis.

South Korea’s econ­omy ex­panded a dis­ap­point­ing 2.6pc last year – the low­est since 2012.

Mean­whie, a South Korean law firm said it ex­pected thou­sands more to join a class-ac­tion law­suit seek­ing com­pen­sa­tion from Sam­sung over its com­bust­ing Galaxy Note 7 smart­phones.

Seoul based Har­vest Law filed the ini­tial suit on Oc­to­ber 24 on be­half of 527 Note 7 buy­ers – de­mand­ing 500,000 won ($440) per plain­tiff for time and ef­fort lost dur­ing a chaotic re­call pro­cess that turned into a PR night­mare for the world’s largest smart­phone maker.

Al­though the sums in­volved – even when ac­cu­mu­lated – are tiny for a gi­ant like Sam­sung, the law­suit il­lus­trates the dent the Note 7 fi­asco has made in the pres­tige of a com­pany used to be be­ing treated as cor­po­rate roy­alty in South Korea.

Its new-found vul­ner­a­bil­ity was fur­ther un­der­lined this week by the de­ci­sion of a South Korean in­vest­ment ad­vi­sory firm to rec­om­mend share­hold­ers vote against the nom­i­na­tion to the Sam­sung board of vice chair JY Lee – the fam­ily-run con­glom­er­ate’s heir ap­par­ent.

Sam­sung of­fered Note 7 own­ers a full re­fund or an ex­change for a dif­fer­ent Sam­sung phone as well as a 30,000 won ($26) gift card. –

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