LG Elec names new CEO as mobile business struggles

LG Elec names new CEO as mobile business struggles

Seoul: South Korea’s LG Group appointed a founding family member as the new chief executive of LG Electronics Inc, seeking to turn around the company’s loss-making mobile phone business, the world’s third largest.

Koo Bon-joon, CEO of trading firm LG International will take over from Nam Yong, who offered to resign from the top job to take responsibility for poor management, LG said.

LG Electronics has been under pressure after its mobile business reported a record loss last quarter and warned of a similar loss this quarter due to a lack of strong smartphone models.

“The top management change will bring a positive change to the struggling company. Under the owner-management system, LG is expected to make more aggressive investments, and to regain its competitiveness," said Kiwoom Securities analyst Kim Ji-san.

Investors welcomed the sudden change and pushed LG Electronics shares up 5%—putting them on course for their biggest percentage gain in almost six months.

Management changes are usually made at the end of the year but the change, which takes effect from 1 Oct., reflected an urgency to overhaul the struggling mobile unit.

“We made the decision to give an incoming chief executive enough time to prepare for next year," LG Group said in a statement.

It is the second major management shake up the industry has seen this month. The world’s No.1 handset maker Nokia said last Friday it has hired Stephen Elop, a Canadian Microsoft executive, to replace its embattled CEO in its most fundamental management shakeup in decades.

LG has failed to come up with a hit model to compete against Apple’s iPhone or Android phones made by Samsung Electronics, Taiwan’s HTC and Motorola and its models so far have been too weak to cover overhead costs.

The 58-year-old Koo is a younger brother of LG Group chairman Koo Bon-moo and also served as chief executive of flat-screen maker LG.Philips LCD, later renamed as LG Display, and worked as a project manager at US telecoms firm AT&T.

“Koo has a deep understanding in technology and extensive experience in broad industries from chemicals, electronics and resources," LG said in a statement.

“He had also successfully transformed LG Display through difficult times and enhanced profitability of LG International dramatically."

Further Restructuring

“After his inauguration, Koo is expected to replace (mobile chief) Skott Ahn and other top executives... Under the ownership management, LG will speed up the decision making process and quickly respond to the change of the market environment," Harrison Cho, an analyst at KB Investment & Securities.

LG, which has seen none of its smartphones yet reach the 1 million unit sales mark, unveiled the new Optimus One this week and said it was targetting sales of 10 million units for its first smartphone to be launched globally through some 120 carriers.

LG’s mobile business has struggled since last year following a series of fumbles in smartphone development, which led to higher marketing costs and lower selling prices.

It hopes the new Optimus One, along with a new line-up powered by Microsoft’s Windows Phone in the fourth quarter, would revive its reputation.

But investors are concerned that the new rollouts may come too late with little differentiation factors, when rivals aggressively introduce new products for the crucial year-end holiday period.

Nokia unveiled an arsenal of smartphones crucial to its fightback against Apple this week and HTC also introduced two new handsets using Google’s Android operating system this week.

Koo will be also missioned to improve LG’s TV operation, ranked as the world’s No.2, as the business posted a razor-thin 0.5% profit margin due to rising competition from Japanese rivals such as Sony.