Battery firms tighten employee discipline amid EV glut
Korea’s leading battery makers are tightening discipline among their executives and employees amid a slowdown in the global demand for electric vehicles to tackle worsening profitability, industry officials said on Thursday.
Lee Seok-hee, who became SK On CEO in December after resigning as SK hynix CEO two years ago, said Tuesday he will give up 20 percent of his annual salary until the battery firm turns a profit.
He also asked executives to come to the office by 7 a.m. to devise business plans and increase communication.
SK On will disclose its 2023 earnings result next Tuesday. Analysts estimate the company’s operating loss during the fourth quarter of last year at around 198 billion won ($148 million), contrary to its previous forecast that it would start making its first-ever quarterly operating profit from that quarter.
“We are facing the crisis of a slowdown in market growth in the aftermath of the U.S. interest rate hikes and the global economic recession,” Lee reportedly said in a meeting with SK On executives. “To achieve the goal of making 2024 the first year of turnaround, all executives, including the CEO, should make every effort to overcome the crisis.”
LG Energy Solution (LGES) halved the bonus for its performance in 2023 after its fourth-quarter operating profit dropped 53.7 percent from the previous quarter to 338.2 billion won, falling short of the market consensus of 600 billion won.
Hana Securities even expects the battery firm’s operating profit to decline to 29.6 billion won during the first quarter of this year, saying that it will suffer a quarterly loss unless it takes into account the U.S. tax incentives under the Inflation Reduction Act (IRA).
LGES decided not to take the U.S. tax benefits into account when setting the size of the performance-based bonus. As a result, the size of the bonus stood at 362 percent of each employee’s monthly wage on average, down from 870 percent during the previous year.
To protest the decision, unionized workers held a rally on Tuesday at the company’s factory in Cheongju, North Chungcheong Province, and sent LGES CEO Kim Dong-myung a letter criticizing the bonus cut. Other employees also complained about the bonus by sending messages to Kim via the company intranet.
The battery maker, however, has maintained a firm stance on its decision to reduce the bonus. The company explained that it has never taken the U.S. tax credits into consideration when measuring its performance, regardless of the recent fall in its profitability.
Although the CEO sent emails to employees after announcing the size of the bonus, he just asked them to accept the decision, adding that the company is still vulnerable to changes in business environments.
“Realizing that we should prioritize minimizing the fallout from the external factors, we will strengthen the company’s fundamentals by enhancing cost competitiveness and preparing for business for the future,” Kim said.
Samsung SDI decided not to cut the performance-based bonus for its employees in charge of the battery business, although its fourth-quarter operating profit from the business fell 45 percent from the previous quarter and 37 percent from the previous year to 226.1 billion won.