Front Page

UK

World

Business

Sci/Tech

Sport

Despatches

World Summary


On Air

Cantonese

Talking Point

Feedback

Text Only

Help

Site Map

Saturday, December 6, 1997 Published at 19:19 GMT



Business

South Korean business giant collapses
image: [ Halla Group: interests included shipbuilding and engineering ]
Halla Group: interests included shipbuilding and engineering

One of South Korea largest business conglomerates has failed only two days after the International Monetary Fund approved a $60 billion package to rescue the country's battered economy.

The Halla group, a shipbuilding and engineering conglomerate, says its three core units will apply for special court protection against creditors because of massive financial problems.

The group, the twelfth largest in South Korea, is believed to have debts of more than $5 billion - 20 times the value of its equity. The Korea Stock Exchange has suspended trading in Halla shares.

At a news conference, the Halla Vice-Chairman, Park Sung-Suk, said its core companies had made huge losses over the past few years, and could not remain afloat once banks started calling in their loans.

The collapse looks set to take its toll on Britain. Nearly 200 jobs in the South Wales valleys are now under threat at a subsidiary of the Halla Group.

The 17m factory, which makes fork lift trucks and earth-moving equipment, opened just a year ago.

It was once hailed as a turning point for the local economy. Now the community is worried about negative effects that closure will bring.

The Halla Group's failure follows desperate efforts by managers to stave off receivership. At the end of last month Halla's shipbuilding company announced plans to lay off half its 6,000 workers.

Halla is the sixth major conglomerate to face financial collapse this year, a process which has saddled South Korea's banks with more than $30 billion in bad debts.

One of the country's investment banks in South Korea has also gone bust since the IMF bailout. The Coryo Investment Company was declared bankrupt after defaulting on loan repayments.

However, shares on the Korea Stock Market closed slightly up on Saturday as investors, especially individuals, brushed aside the latest bad news about the Halla group.

The composite index ended up 1.61 points, or 0.37%, at 435.73 as record 111.68 million shares changed hands. The previous record trading volume was 111.19 million shares, set on Thursday.

The BBC Seoul correspondent says that a combination of reckless expansion and easy credit from state-controlled banks is the root cause of South Korea's problems.

Under the terms of the IMF agreement, the government has promised to force mergers and even liquidation of the weaker financial institutions.

It is also promising to weaken the power of the family-owned business groups which dominate the economy. This process is expected to lead to high levels of unemployment not seen in South Korea for many decades.








Back to top | BBC News Home | BBC Homepage


Related Stories

South Korea: How the IMF deal works

Korea: IMF loan background

Brave new economic world for South Korea

Korean bank goes bust

Bailing out an Asian tiger

South Korean share prices rise after IMF deal

Internet Links

Korea Stock Exchange

The IMF

The Halla group


The BBC is not responsible for the content of external internet sites.
In this section

Microsoft trial mediator welcomed

Vodafone takeover battle heats up

EU fraud: a billion dollar bill

NatWest bid timetable frozen

No longer Liffe as we know it

France faces EU action over electricity

Inquiry into energy provider loyalty

The growing threat of internet fraud

Christmas turkey strike vote

Brown considers IMF job

Train robbery game hope for SCi

From Sport
League to rule on Sky shares

Mannesmann fights back

Online share dealing triples

Chinese imports boost US trade gap

Pace enters US cable heartland

The rapid rise of Vodafone

Storehouse splits up Mothercare and Bhs

Brown's bulging war-chest

The hidden shopping bills

Europe's top net stock

House passes US budget

Rate fears as sales soar

Safeway faces cash demand probe

Mitchell intervenes to help shipyard

Maxwell pledge to pensioners

Power cuts spark union warning

New factory creates 500 jobs

Drugs company announces 300 jobs

Oil reaches nine-year high

'Asian management culture must change'

US 'prepared for Millennium Bug'

Gucci on a spending spree





Business Contents

Your Money
Market Data
Economy
Companies
Business Basics
E-Commerce