SK Battery America (Image courtesy of SK On)
SEOUL, Jul. 3 (Korea Bizwire) – SK On, the battery manufacturing arm of South Korea’s SK Group, has unveiled a comprehensive restructuring plan aimed at steering the company towards profitability and solidifying its position in the global electric vehicle (EV) battery market.
The move comes as SK Group reaffirms its commitment to the battery business as a core component of its future growth strategy.
The company’s turnaround efforts are seen as crucial not only for SK On’s survival but for the success of SK Group as a whole. A high-ranking SK official stated, “Electric vehicles are the predetermined future,” emphasizing that the recent management strategy meeting reaffirmed the group’s intention to revitalize SK On and move forward together.
SK On’s aggressive self-rescue measures include significant cost-cutting initiatives and operational improvements. The company aims to achieve profitability in the second half of this year through a combination of stringent cost reductions and capital injections.
This goal is particularly ambitious given that SK On has reported losses for ten consecutive quarters since its establishment in 2021, with an expected operating loss of around 300 billion won in the second quarter of this year.
The restructuring plan involves several key elements. SK On has eliminated the Chief Administrative Officer (CAO) and Chief Commercial Officer (CCO) positions and delegated decisions on C-level executives to the board of directors.
The company has also frozen executive salaries and reduced business expenses and employee benefits. There is a renewed emphasis on office-based work rather than remote work, focusing on a back-to-basics approach.
On the financial front, SK On recently issued hybrid securities to raise 500 billion won at a 6.424% interest rate, aiming to improve its capital structure. The company is also reassessing the timing of its overseas factory investments, including delaying the activation of its Kentucky plant 2 (a joint venture with Ford) to after 2026.
SK Group is preparing for a potential prolonged slowdown in the EV market, which could last for two or three years. To weather this period, the group has declared a full mobilization of resources to support SK On.
The company faces significant challenges, including a low factory utilization rate, particularly in its U.S. operations, where first-quarter utilization was reported to be around 10%. SK On plans to address this by repurposing production facilities and ramping up production at its Georgia plant.
SK Group is also considering a merger between SK Innovation (SK On’s parent company) and SK E&S, which could provide additional financial support for SK On’s operations and investments.
Industry analysts note that SK On’s recovery is critical for the entire SK Group’s battery value chain. The company’s ability to overcome the current market “chasm” and establish global competitiveness will be crucial for the success of SK Group’s vertical integration strategy in the battery sector.
Kevin Lee (kevinlee@koreabizwire.com)
