Kim Dongchun Appoints Manufacturing Competitiveness Task Force at Cheongju Plant
Workforce Efficiency Prioritized Over Cost Reduction
Slow Recovery of Key Businesses Amid NCC Downturn
LG Chem has initiated restructuring in its advanced materials business, even as the company faces mounting cost pressures due to the sluggish performance of its petrochemical division, including the consolidation of its naphtha cracking center (NCC) facilities. As the company’s traditional revenue base wavers, it is now pursuing workforce efficiency measures even in areas previously classified as future growth engines. With the appointment of the new CEO, Kim Dongchun, who previously headed the Advanced Materials Business Division, analysts say the company is accelerating its company-wide efforts to improve its organizational structure.
According to the industry on December 19, LG Chem recently established a “Manufacturing Competitiveness Enhancement Task Force (TF)” under the executives in charge of the Cheongju and Ochang plants. The advanced materials business consists of cathode materials, electronic materials, engineering materials, and separators, producing cathode materials for secondary batteries, display materials such as OLEDs, and recycled plastics. The Cheongju and Ochang plants, considered key production hubs, employ approximately 2,400 people.
Typically, organizations responsible for “manufacturing competitiveness” focus on process efficiency or cost reduction, but this TF has been primarily tasked with “workforce efficiency.” An industry official explained, “With limited room for cost savings through facility or process improvements, the company has decided to start by reducing labor costs, which are largely fixed expenses.” This move is interpreted as an attempt to improve profitability not through temporary cost controls, but by redesigning the workforce structure at the production site level.
The scale of the restructuring is expected to reach up to 1,000 employees, or about 40%. Previously, Choi Jongwan, Executive Director of the Cheongju and Ochang plants, stated in a message to employees earlier last month, “Unless there is a dramatic turnaround, about 1,000 employees at the Cheongju and Ochang plants will not be able to participate in production activities in the second half of next year.”
The advanced materials business segment saw robust performance in cathode materials due to the global expansion of electric vehicles after 2022, but since the second half of the following year, profitability has sharply deteriorated due to a demand slowdown-referred to as a “chasm”-and a consequent drop in cathode material prices. The operating margin for the advanced materials division, which stood at 35.7% in 2022, plummeted to a cumulative 9.8% as of the third quarter of this year.
LG Chem is also conducting a voluntary retirement program for the advanced materials division. The company previously carried out a voluntary retirement program in April last year, which was a restructuring measure following the sale of its polarizer business in September 2023. The current voluntary retirement program appears to be a response to the sale of its water treatment filter business in June of this year. Such consecutive rounds of restructuring are considered unusual.
An industry official commented, “Although the company managed to improve its performance to some extent in the third quarter this year through cost reductions, there are clear limitations. As the recovery of major businesses is delayed, workforce reductions will become an unavoidable choice.”
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