Hyundai axes 14,000 `to stay competitive'

HYUNDAI, the car giant, yesterday announced plans to slash 30 per cent of its workforce - or almost 14,000 jobs - in a move that took the shine off a day that saw increasing signs of economic recovery in South Korea.

A company spokesman said Hyundai could only remain competitive if cuts of this order were made. Domestic sales dropped over 50 per cent in the first quarter of this year, while highly competitively priced exports only rose 19 per cent.

Job cuts could provoke labour unrest at Hyundai, which lost more than $700m (pounds 420m) of production early last year because of a strike against legislation that would have facilitated layoffs.

The recovery of the Asian country's economy had earlier received a large vote of confidence from international investors who scrambled to buy $4bn (pounds 2.4m) in government bonds issued on Wednesday. The response was so good that the government yesterday announced that it plans to issue $9bn of sovereign debt this year.

The $4bn issue in New York was the first ever debt issue aimed at foreign investors. This is also the first time the Korean government borrowed under its own name, rather than via the state-owned Korea Development Bank or Export and Import Bank of Korea.

Bond dealers said the successful completion of this issue cleared an overhang which was hovering over the Asian bond market unsure of the response. It is also expected that the bond will set a new benchmark for Asian debt.

Those rushing to buy the bonds clearly believe the new Korean government is serious in its economic and fiscal reform proposals and are in effect endorsing the clean bill of health which the Korean economy has recently received from the International Monetary Fund.

Further good news for the South-east Asian region came from McDonald's, which said it planned to invest about $1.5bn in the Asia-Pacific area in the next three years, expressing confidence it could weather the region's economic problems as it built new markets to offset weak US sales.