(News Focus) Won's rapid slide adds to S. Korean firms' pain

SEOUL, Oct. 7 (Yonhap) -- Deepening global financial turmoil, persistently weak domestic consumption and a foreign liquidity shortage are sending the top names in South Korean business into a tailspin, company officials and analysts said Tuesday.

Yet they must bear the brunt of another major challenge: the Korean currency's
sharp decline against the U.S. dollar.
With the won losing more than a quarter of its value so far this year, big
companies in aviation and oil refining such as Korean Air Lines Co. and SK Energy
Co. have been wary of dismal earnings.
Even big-name exporters like Samsung Electronics Co. and Hyundai Motor Co., which
have traditionally benefitted from a weaker won as it makes their goods cheaper
overseas, have been struggle to ride out the unpredictable currency movement, as
the won's weakness comes just at the wrong time.
"The recent depreciation of the Korean won may be doing more harm than good to
the Korean economy," said Alaistair Chan, a Sydney-based economist at Moody's
Economy.com, in a report.
"A heavy importer of crude oil and other raw materials, the growing burden of
import payments will far outweigh any potential benefit derived from an
improvement of the price-competitiveness of Korean exports, at least in the short
term," the economist said.
The won nosedived to as low as 1,330 per dollar at one point in early morning
trade Tuesday, marking the lowest point since 2002.
Amid forecasts of staggering losses this year, Korean Air, the nation's No. 1
passenger carrier, has temporarily suspended some of its overseas routes.
If the won's depreciation continues, Korean Air, which posted 98.6 billion won
(US$78 million) in operating loss in the first-half of this year, would report a
full-year loss, analysts say.
SK Energy posted about 350 billion won in foreign currency-related losses in the
January-June period.
To reduce mounting losses, SK Energy is trying to increase exports of its
petroleum goods. "We have no choice but to cope with the situation by adjusting
volumes of imports and exports," said an SK official.
Signs that the credit crisis is widening in the U.S. prompted Hyundai Motor Co.,
the nation's biggest automaker, to shift its focus to Europe.
"In the wake of the global financial crisis, the global auto market is recently
undergoing a sharp contraction," Hyundai Motor Chairman Chung Mong-koo told
reporters on Thursday.
"Hyundai Motor aims to improve its profitability by increasing sales of the i30
and C'eed cars in Europe," said Chung, referring to the company's compact models.

Last month, Hyundai's sales in the U.S. declined 25.4 percent to 24,765 vehicles.
In the first nine months of this year, Hyundai sold 337.664 vehicles in the U.S.,
down six percent, making it increasingly unlikely it will meet this year's
American sales target of 515,000 units.
Rumors are circulating that Samsung Electronics is piling up dollars to prepare
for its $5.85 billion bid to buy SanDisk Corp. of the U.S.
Samsung, the world's largest maker of computer memory chips, has said it will
"acquire SanDisk by borrowing money from banks" if it is short of dollars.
For many small- and medium-sized exporters, a sense of crisis is running higher
than ever before.
Some local newspapers reported that the total losses by smaller exporters
suffering from currency options would amount to one trillion won.
The currency options allow companies to hedge risks from the won's fluctuation
versus the dollar when the won-dollar exchange rate moves within a certain range.
However, when the won's value falls below the range, companies sell the dollar at
far below market prices.
Last month, Taesan LCD Co., a flat-screen parts maker with an annual sales of 700
billion won, filed for bankruptcy due to mounting losses from a currency option
contract.
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