[Exclusive] Chinese Company "Will Terminate OEM Early".. LG Chem Faces Sudden Blow with 500 Staff Reallocation

Hefei, China "Will Advance Shutdown Timing from Year-End"
Considering Solutions as Affected Workers Have Nowhere to Go
LG Chem "No Workforce Restructuring"

LG Chem is facing an emergency in the redeployment of up to 500 employees due to issues related to the transfer of facilities by a Chinese company. The Chinese company in question acquired LG Chem's IT film business last year and had planned to transfer domestic facilities by the end of this year, but recently decided to advance the schedule. LG Chem is struggling to find a solution as the film business personnel redeployment issue overlaps with deteriorating performance caused by the petrochemical sector slump.

According to industry sources on the 19th, Hefei Xinmei Materials, a Chinese company that purchased LG Chem's polarizing plate material business, recently notified LG Chem that it would advance the shutdown date of the film production line at the Ochang plant, originally scheduled for the end of this year. When LG Chem and Hefei Xinmei signed the film business sale contract last year, they agreed to move the facilities in Ochang and Cheongju to China line by line and operate the factory under an Original Equipment Manufacturer (OEM) arrangement during this period. However, Hefei Xinmei has now decided to terminate the OEM contract early.

LG Chem Ochang Plant

Previously, in September last year, LG Chem transferred its polarizing plate business to Chinese company Shan Jin Optoelectronics and the polarizing plate materials to Hefei Xinmei Materials, citing the need to wind down marginal businesses and invest in new ventures. The total sale price for goodwill, patents, and production lines was approximately 1.1 trillion KRW.

Hefei Xinmei halted some lines at the Ochang plant at the end of last month as planned, but judged that the OEM costs were higher than expected and decided to advance the second shutdown date from the end of the year.

LG Chem had planned to implement phased personnel redeployment over about five years, which is the usual time required for facility transfers. However, with the Chinese company pushing to expedite the facility transfer, LG Chem’s phased redeployment schedule has inevitably been disrupted. If the shutdown schedule is moved up, the surplus workforce is expected to increase rapidly. At the end of last month, 18 employees became idle due to the shutdown of the first production line. The total number of employees in the film business division is about 500, with around 400 at the Ochang plant and 100 at the Cheongju plant.

The company is currently working on countermeasures. Kim Dong-chun, Executive Vice President of the Electronic Materials Division, is expected to visit the local company at the end of this month to discuss the facility transfer issue.

The biggest problem is that there are fewer available positions compared to the number of employees subject to redeployment. Due to the petrochemical sector slump, demand for personnel is low, and new businesses are progressing slowly. A union official said, "Among the approximately 80 retirees this year from the Yeosu, Daesan, and Dangjin plants, only 30 positions have been opened in the Advanced Materials Division at the Cheongju and Ochang plants." He added, "Most film business employees are older, but plants like Yeosu prefer younger workers, so employees in their 50s cannot be transferred there."

In particular, Shan Jin, the Chinese company that acquired the polarizing plate film business, is also reportedly planning to push for early termination of the OEM contract, which is expected to increase the number of employees subject to redeployment.

The union has demanded that the company disclose specific plans regarding when and how much of the 1.1 trillion KRW sale proceeds will be invested in new businesses such as cathode materials, and when new production lines will be established.

The company has a policy to conduct redeployment whenever vacancies arise due to retirement or other reasons. However, with the production line shutdown occurring earlier than expected and surplus personnel emerging all at once, the redeployment process has become more complicated.

A company official said, "We are still in discussions with the Chinese company regarding the facility withdrawal schedule," adding, "There will be no forced workforce restructuring, and redeployment will be carried out gradually." He continued, "We are currently conducting internal recruitment for redeployment, but the target is not only the film business but the entire Ochang and Cheongju plants."