While many of the global handset leaders find themselves in strange territory, going backwards in sales and wondering what to do next, LG Electronics made a statement this week that it plans to invest hard in R&D to see out the recession.
It’s a lot easier to say when a few weeks back it produced the rosiest mobile fortunes of the bunch, with company annual revenues up to $46.4 billion including subsidiaries, and consolidated operating profits of $3 billion up a fraction on last year.
But that was across the entire business and LG’s Mobile Communication Company was just $3.3 billion of that, a huge 34.6% higher than a year earlier with handset shipments up 8% to 25.7 million in the quarter and over 100 million during 2008.
In order to maintain product leadership and increase market competitiveness, LG CEO Yong Nam confirmed that the company would not reduce ‘ and could even increase ‘ its investment in R&D, marketing, branding and design.
‘Every company ‘- not just LG — has been affected negatively by the economic downturn,’ said CEO Nam, who was behind the successful turnaround of LG Telecom during the Asian Financial Crisis of 1997, ‘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.’
At the end of 2008, LG Electronics established a Crisis War Room and now three months later says it has identified 11 key action items. Business units have been instructed to establish task force teams to take responsibility for managing a swathe of cost-saving initiatives.
LG will cut $2.2 billion from expenses, review its procurement system, continue to reduce its inventory, and will optimize its supply chain and create a more efficient purchasing process.
LG says it now has non-Korean executives occupying five of its seven highest positions and has recruited 200 professionals around the world to oversee marketing, supply chain and procurement.
Back to those January results LG’s Digital Appliance division had sales up 20% to $2.18 billion with small losses, and its Digital Display business had sales up over 16% to $3.4 billion. That division has been also affected by the huge surge in availability of LCD TVs which saw volumes rise dramatically by around 22%, but made losses.