LG Electronics (Thailand) Co Ltd, a South Korea-based consumer electronics manufacturer, merged with its marketing arm - LG Mitr Electronics Co Ltd last month to streamline operations.

Prapas Prasitthiyapun, product marketing manager, said yesterday the merger would help LG control its operating costs. LG Mitr formerly had to rent warehouses around the country but now all products will be warehoused at LG plants.

He said the sluggish economy had not been a factor in the merger decision. Instead, it is part of a long-term plan to consolidate and improve LG's competitiveness.

The move comes after the company's parent announced yesterday that it lost 9.7 billion South Korean won (Bt380 million), its first loss since the fourth quarter of 2003. The main drag on the company was its LG Philips LCD division, which posted big net losses. LG Electronics actually made some profit, the company said.

The company suffered only a 0.1-per-cent reduction in sales and operating profit from the previous quarter.

Prapas said the company did not need to change its shareholding structure or lay off any staff, but adjustments will be made working practices.

Although the economy was not a factor in the merger, the company does have some concerns, Prapas said. Political uncertainty and rising oil prices are the two main reasons that tend to make people delay new purchases as they may be unsure about their financial stability.

LG's production costs have increased to a degree but it cannot raise prices to compensate unless competitors do the same.

Its home appliance products include washing machines, refrigerators, microwaves and vacuum cleaners. Washing machines account for 70 per cent of its sales.

The company thinks it has an advantage over its regional competitors, particularly Japan, as front-loading washing machines are becoming popular but the market is still dominated by top-loaders, which are mainly made in Japan.

To push its front-loading washing machines, LG plans to prominently display them in its advertising and marketing activities during the second half of this year. The company has allocated Bt500 million for advertising and marketing this year.

Front-loading washing machines are relative newcomers to the Thai market and competition between major electronics firms is fierce. Front-loaders account for just 5 per cent from 900,000 units sold last year, in a market worth Bt8 billion, according to Prapas.

LG has a 6-per-cent share of the front-loader market and is the market leader in the overall washing machine market with a 22-per-cent market share, followed by Hitachi, Prapas said.

He said front-loaders are widely used in developed countries and LG plans to launch 7-kilogram front-load washing machine.

Prapas forecasted that the market would grow to 1.1 million units worth Bt9 billion this year.

Apart from washing machines, it also plans to launch 10 new microwave models and six or seven new types of refrigerators. LG Electronics posted a quarterly loss for the first time in two-and-a-half years mainly hurt by big losses at its flat screen unit LG Philips LCD.

Nitida Asawanipont

The Nation