POSCO Energy, a key affiliate of steelmaking giant POSCO Group, is set to cut its workforce via a voluntary layoff program early this month, targeting the fuel cell business that is considered its future growth engine, an industry source told The Korea Herald.

The nation’s largest private natural gas power generator has suffered from dwindling profits for the past few years, affected by the continued fall in its LNG power plant operation rate. 


“With the approval of POSCO management, the energy arm is set to reduce 40 percent of the workforce at its fuel cell division composed of about 400 staff,” the source said.

A POSCO Energy spokesperson said the company would streamline its business through cost-cutting plans, without elaborating further details.

If the energy giant launches an early retirement program, as early as next week, it will be the first case among key POSCO units to choose workforce reduction amid the continued business slump.

When it comes to reasons why the company has targeted a new business unit for job cuts rather than the money-losing LNG power business, the source pointed out, “The LNG power unit composed of technicians has limitations for workforce reduction. In addition, the company is not sure of its capability in the fuel cell business.’’

The business of fuel cells -- which generate electricity from hydrogen -- was pioneered by the firm in 2003 as its new revenue source.

After having enjoyed a dominant position for over a decade in the market, the fuel cell business has recently seen weak sales due to prolonged low oil prices and growing competition with new entrants like Doosan.

Doosan jumped into the market in 2014 by acquiring foreign companies with a technological edge in the fuel cell energy.

All in all, industry experts pointed out POSCO Energy needs to take actions to stay afloat during the continued business slump not only in its main LNG power business and but also in its new growth engine.

POSCO Energy, whose liquefied natural gas business accounts for around 80 percent of total revenue, has continued to see sales drop for the past three years from 2.9 trillion won ($2.5 billion) in 2013 to 2.5 trillion won in 2014 and 1.9 trillion won in 2015.

Witnessing worsening business conditions, the workforce reduction is seen as inevitable by market watchers as the oversupply issue is expected to continue for the time being.

POSCO Energy CEO Yoon Dong-jun also said last January in a meeting with local press, “We are considering various options for management innovation as the business situation is worsening,” adding, the company would not go public this year due to bad market conditions.

By Shin Ji-hye (shinjh@heraldcorp.com)