South Korea’s retail-to-chemical conglomerate Lotte Group on Thursday replaced 21 chief executives across its affiliates and slashed executive jobs by 22% in a sweeping leadership reshuffle amid rumors of a liquidity crisis.
Shin Yoo-yeol, Lotte Group Chairman Shin Dong-bin’s eldest son and heir apparent, was promoted to vice president, assuming a greater management role.
The son will seek sustainable new growth drivers for the conglomerate by exploring business opportunities overseas, the group said in a statement.
Lotte said 21 CEO-level executives, accounting for 36% of the group affiliates’ entire CEOs, were replaced while 22% of executive-level officials stepped down – a move designed to streamline its decision-making process and improve organizational efficiency.
The reshuffle comes amid widespread rumors that Korea’s sixth-largest business group by assets is grappling with a liquidity crunch, driven by poor performance in its chemical and retail subsidiaries – the conglomerate’s cash cow.
COMPANIES WITH RECURRING LOSSES
Many of the replaced CEOs belonged to companies with poor performance or recurring losses for years.
At Lotte’s chemicals-related affiliates, which have been posting massive losses, 10 out of 13 CEOs were replaced.
Lee Young-jun, a vice president at Lotte Chemical Corp., was promoted to president. He will lead Lotte Group’s chemical division as its chief executive.
Lotte Hotel Co. underwent a full leadership overhaul across its three divisions – hotel, duty-free, and Lotte World.
Jung Ho-suk, a vice president in charge of business support at Lotte Corp., was appointed as CEO of Lotte Hotel.
Rho Joon-hyung, head of the Management Innovation Office at Lotte Corp., was promoted to president to spearhead the group’s business restructuring and innovation efforts.
Three vice chairmen – Lee Dong-woo at Lotte Corp., Lee Young-gu at Lotte’s food division chief, and Kim Sang-hyun, head of the retail division – retained their positions.
Vice Chair Lee Dong-woo will continue to oversee the conglomerate’s crisis management and lead the group’s innovation efforts.
SHARES RISE
Shares of many Lotte affiliates rose following the drastic executive reshuffle.
Lotte Chemical closed 4.7% higher at 69,400 won.
Lotte Shopping Co., Lotte Corp. and Lotte Wellfood Co. saw their shares rise 3.7%, 3.6%, and 2.6%, respectively.
Analysts said the market reacted positively to the group’s restructuring efforts.
To reassure investors of its financial stability, Lotte Group recently announced plans to use its flagship skyscraper, the 6 trillion won ($4.31 billion) Lotte World Tower, as collateral for corporate bonds issued by Lotte Chemical.
On Thursday, Lotte Group also held an investor relations session with institutional investors.
During the meeting, Lotte Shopping announced plans to reassess its 7.6 trillion won worth of land assets – the first time to do so in 15 years.
The group said the revaluation could enhance its financial soundness through increased capital, reduced debt ratios and improved credit ratings.
Last week, Lotte Shopping put one of its core department stores, Lotte Department Store Centum City in Busan, on the market in line with its parent group’s restructuring efforts to improve its financial health.
By Jae-Kwang Ahn and Sun A Lee
ahnjk@hankyung.com
In-Soo Nam edited this article.
