Thoughts on Korean Business by Don Southerton

Hyundai Automotive Group (Hyundai AG) is further expanding its business territory into Korean steel and construction. A consortium led by Hyundai AG's two steel units, INI Steel and Hyundai Hysco, has agreed to take over the troubled Hanbo Steel for $777 million. The acquisition is crucial in Hyundai AG holding down the cost of steel required in automotive manufacturing. In 2003, Hanbo produced 3 million tons of hot and cold-rolled coils along with other automotive steel products, while generating $373 million in sales. HAG plans that INI will buy Hanbo's hot-rolled steel and steel bar producing facilities, while Hysco will purchase its cold-rolled steel plant. Following the Chung family legacy of broad business operations that included construction not all business expansion plans of Hyundai AG are related to the car sector. AMCO, a construction arm of Hyundai AG, announced it plans to enter the housing construction market. AMCO plans to sell 716 apartments in...

On Wednesday, Hyundai Heavy Industries Co., Ltd. (HHI), the world's No. 1 shipbuilder, held a large company event for its workers at the flagship Ulsan shipyard to celebrate "No Strike for Ten Consecutive Years." I find this significant since strikes in Korea are for many industries annual events. Min Keh-sik, HHI’s vice chairman said the company has always shown respect for workers and tried to maintain jobs for them. Min notes " we came to believe that cooperation rather than conflict will be in the best interest for us.” HHI's good labor relations are an exceptional in the nation's shipbuilding and heavy industry. Heavy industy has traditionally experienced labor unrest each summer when they negotiate yearly labor contracts. Hyundai Heavy Industries commands about a 15 percent share of the global market. The company passed the "1,000 ships" benchmark in 2002, amounting to 80 million deadweight tons produced in total. HHI’s main ship...

On July 28, Hyundai Motor Company celebrated a milestone in auto manufacturing by exporting a cumulative 10 million units In a ceremony held at its main plant in South Korea, Hyundai Motor Company workers prepared to ship their 10 millionth units, its new entry-level Tucson sports utility vehicle. In 1976, Hyundai began exporting autos with 6 units of the Pony being shipped to Ecuador. At the ceremony, Hyundai Vice-Chairman Dr. Kim Dong-jin, after reiterating the company’s plan to become one of the world's top five automakers announced Hyundai would launch a luxury brand in 2007. This model will compete with BMW's 5 Series and Mercedes-Benz's E-Class I wish to stress the beneficial impact Hyundai exports have on South Korean sluggish economy. The firm, which projects $12 billion in exports this year, will produce 5 percent of South Korea's 2004 anticipated $240 billion total More importantly, Hyundai exports will generate a trade surplus estimated at ...

Creditors of Ssangyong Motors and Shanghai Automotive Industry Corp. (SAIC) signed a memorandum of understanding for the sale of the South Korean carmaker. Chohung Bank, the principle creditor and SAIC President Hu Maoyuan signed the agreement in Seoul on Tuesday. Hu Maoyuan noted his firm would focus on consolidating Ssangyong Motor’s competitiveness and seek measures to expand into the global market. Ssangyong vehicles, in addition to its domestic Korean market, will be retailed in China. Hu ruled out the possibility of cooperation between GM Daewoo Auto & Technology and Ssangyong after the deal. SAIC holds 10 percent of GM Daewoo. This comes as no suprise since GM already has joint ventures in China with SAIC's rivals. According to industry sources, the sales price was settled at about $500 million. SAIC was selected as the preferred bidder, while a consortium led by an American pension fund was named the next main bidder.

In Seoul, a record heat wave has made life unbearable for many city dwellers. Fortunately, Korea's subtropical resort island of Cheju has emerged as one of the hottest destinations for vacationers from South Korea and East Asia. With the beginning of South Korea's vacation season, more than 35,000 people were estimated to have visited Cheju last weekend. Located off the southwest coast of Korea, the island is often referred to as paradise and the "Hawaii of East Asia." Cheju Island, a popular South Korean tourist spot, has gaining global recognition as a resort area and conference center. Contributing to the popularity of a vacation on Cheju is the introduction of the five-day workweek system. In fact the island expects mainland workers and their families to spend more time and money on leisure and sports activities, with Cheju a top destination. According to the Cheju officials, 4.9 million people from South Korea and abroad visited the resort island la...

WASHINGTON, D.C. -- Christopher Hill, the new U.S ambassador-designate to Korea, held his first official meeting with Korean correspondents in the State Department on Thursday. Hill is expected to replace current ambassador Thomas Hubbard on August 12. He asked the participating reporters to consider the meeting only as an opportunity for him to introduce himself, saying that he would refrain from talking about important issues between Korea and the U.S. prior to his arrival in Korea. The new ambassador-designate said that he informally likes getting along with ordinary people and he wants to be a friendly person to the Korean people. Hill said that he would work to consolidate public diplomacy between Seoul and Washington. In particular, he will meet various people from diverse areas in order to understand Korean society, which has become pluralistic and different from the one in the 1980s. Hill expressed his affections for Korea, saying that he had volunteered to go to Korea be...

GM Daewoo Auto & Technology Company reached a tentative agreement with its trade union. This ended nine days of walkouts. The strike cost South Korea’s No. 3 automaker about 3,500 vehicles in lost output. GM Daewoo was formed in 2002 after the world's largest automaker General Motor Corp. purchased select assets of bankrupt Daewoo Motor Co. Hyundai and Kia Motor, the nation's one and two ranked largest automakers, already successfully ended their contract talks with their workers earlier in July. (See July 1 blog ). Ssangyong Motor Co, Korea’s fourth largest automaker, remains as the only domestic car company at odds with their union. Ssangyong workers recently struck in protest to the over its pending acquisition by the Shangha Automotive Company. (See yesterday’s blog). Each year workers that form unions at Hyundai, Kia, GM Daewoo, and Ssangyong go on strike during summer. Lat year Hyundai workers were on strike for six weeks, which impacted the supply of ...

Ssangyong Motor Co. workers plan to launch a full-scale strike today just as its major creditors are about to announce the preferred bidder for the automaker, China's largest car company, government-owned Shanghai Automotive Industry Corp. Ssangyong Motor, Korea's No. 4 automaker, manufactures about 10 percent of the Korean market. Its focus is sport utility vehicles including Korando and Rexton, The strike by Korean workers stems from several concerns including doubts that Shanghai Automotive has enough engineering or financial resources to support Ssangyong's further growth. Nevertheless, Song Sang-hoon of Hyundai Securities said Shanghai Automotive could open doors in China for Ssangyong vehicles. In addition, Shanghai Automotive does not have a sport utility vehicle, so Ssangyong could supply its flagship SUVs. Ssangyong Motor came under creditor ownership after its parent Daewoo Group collapsed in 1999 under a mountain of debt. Shanghai Automot...

The Korean Herald reported that the number of mobile phone users in South Korea will probably reach 39.43 million, or 81 percent of the population, by 2008. By the end of 2004, the number of the country's cell phone users may rise to 37.54 million according to the Korea Information Society Development Institute (KISDI). The current population of South Korea is approximately 48.5 million. South Korea is Asia's third-largest wireless market and operates one of the world's fastest mobile phone networks. This essentially permits cell users to easily send or receive images and even download songs via wireless Internet.

Hyundai Motor Group, (the Korean mother corporation of Hyundai Motor America and Kia Motors America) has moved closer to its 2010 goal of becoming one the top five global automakers with its two American operations posting gains in market share. California headquartered Hyundai Motor America and Kia Motors America achieved combined market share in the U.S. of 4.8 percent in June. Hyundai Motor America sold 41,336 units in the U.S. market in June, setting a new monthly sales record, up 18.8 percent from a year ago, to increase its U.S. market share by 0.3 percentage point from March 2003. Hyundai Motor America captured 1 percent of the market in 1999, 1.4 percent in 2000, 2 percent in 2001, 2.2 percent in 2002 and 2.4 percent in 2003. Kia Motors America sales in June totaled 27,636 units, jumping 36 percent over last year’s figure. Hyundai Motor America expects to gain greater market share later this years with the introduction of its sport utility model, Tucson. With ...

South Korea spent $16.5 billion in research and development in 2003, up 10.1 percent from 2002. The major conglomerates (chaebol) accounted for three-fourths of this R&D investment. This trend will continue since the major conglomerates have aggressive plans to continue to invest in sectors they feel are vital for their future growth. The Ministry of Science and Technology recently noted that South Korea’s research spending ballooned by a double digit thanks to brisk investment from private sectors. Companies increased R&D spending by 11.8 percent to $12.4 billion last year, with the conglomerates accounting for more than three-fourths of the investment at more than $9 billion. I see this investment by major conglomerates (including Hyundai Automotive Group, Samsung, and LG) as crucial for these leading Korean-based companies' global growth. Indicative of this strategy is Hyundai Automotive construction of multiple R&D sites both domestically and internationall...

Chong Wa Dae (South Korea's equivalent to the White House) announced it will no longer use the official expression , main enemy, when it discusses North Korea. This is a sign that tensions created over North Korea's nuclear weapons program are lessening and the administration wishes to press forward with its agenda of greater normalization in relations. In future communications, the South Korean government will use terms like military threat or main threat. Negotiations between North and South Korean in many cases can best be described as two steps forward and one step backwards. During the administration of Kim Dae Jung the tense relationship between the two governments thawed considerable. However, the current crisis began in October 2002, when U.S. officials confronted North Korea with evidence of a uranium-enrichment program. In turn, North Korean officials reportedly admitted the existence of a nuclear weapons program and began a series of steps to pressure the Unit...

Kia Motors Corp., one of the two car divisions of Hyundai Automotive Group (HAG), has concerns over delays in the construction of its new plant in Slovakia. It appears these delays center around government acquisition of lands needed for the project. According to the Korean Times, foreign manufacturers such as Kia and PSA Peugeot Citroen have chosen to invest in Slovakia, a former communist country that became a European Union member in May, to benefit from low labor costs, the country's Central European location and its flat 19 percent income tax. The Zilina, Slovakia plant represents the first European investment by HAG. A key aspect of HAG's move involves expanding its global manufacturing capacity and locating plants closer to its markets. HAG currently has car-manufacturing facilities in Turkey, China, and India. A billion dollar plant in America will begin production in 2005. HAG leadership plans for the company to become the world's number 5 car maker by ...

In the recent round of 6-way talks with North Korea, the U.S. proposed a number of terms and incentives. They include an offer to supply much needed heavy fuel oil; a provisional security guarantee; longer-term energy aid; direct talks about the lifting of economic sanctions and removing North Korea from its list of terrorist states; and retraining of NK nuclear scientists during a three-month prep prior to dismantlement of the current facilities. One key point in the U.S. proposal was a guarantee not to invade the North or seek to topple the Kim Jong-il regime if Pyongyang carried out the nuclear freeze as a first step toward full denuclearization. North Korea has proposed a promise to freeze all of its nuclear facilities and reprocessed nuclear materials if the U.S. supported the resumed construction of the halted 2,000,000-kilowatt nuclear power plants begun under the old 1990s agreement. This new generation of nuclear power plant, unlike the current North Korean plant, d...

The Korea International Trade Association (KITA) reported that the shipment of Korean goods out of South Korea during the first 5 months of 2004 rose by 38.4 percent over the same period last year. China's export of goods increased 33.3 percent. This a positive indicator for the Korean economy and the South Korean leadership that has hopes for a strong 2004. Korea also out-performed other countries in the region. For example, among the major exporters Taiwan and Singapore's rate was 26 percent, and Japan's was 21.9 percent KITA projected that Korean exports will hit a record high of $123 billion for the first half of the year on the back of strong overseas demand for Korean high-tech goods. Leaders in Korea's high tech export growth include semiconductor, wireless communications and personal computers. Top non-information technology sector that performed well included machinery, which grew by 60 percent and cars that had a growth rate of 38.8 percen...

Dissimilarity in culture and language form barriers between nationalities and ethnic groups. Americans and Koreans have diverse historic and ideological backgrounds. To reduce misunderstandings, improve cooperation, and foster growth between both groups, it is crucial to recognize that there are distinct differences, and then develop a means of bridging the cultural gap. Experts in cross-cultural communication suggest education is a highly practical and effective solution. For over thirty years, I have interacted with Koreans, studied their fascinating history, and sought to deepen my understanding of their rich heritage. I have found it to be an on-going process. In fact, as is often true with life experiences, the more I learn, the more I realize how much more there is to learn. Nevertheless, this constant learning of another’s culture has allowed me to cultivate friendships and build long-lasting professional relationships. With this in mind, I have a few suggestions to boos...

I was once discussing Korean surnames with a Korean friend. He proudly told me his surname could be traced back over 20 generations. I found this fascinating, since my academic background was in social history, and I knew few American families could trace their pedigree back back 5-6 generations. In Korea, a family tree, or "chokbo" documents an individual family history and records names that are passed down to each new generation. According to Korean Times, a Korean firm has been gathering these family histories to form a comprehensive database. Launched in 1999, the website offered family tree data free of charge until they shut down in late 2003 due to the high cost of the service. The company, Kasung Media plans to reopen the website next year. The company holds information on approximately 16,000 families. Kasung CEO, Lee Byoung-chang notes that "Some of the information goes as far back as A.D. 600 with that of the 'Park', a family of Silla Kingdo...

South Korea's dominant age groups have great impact on Korean business culture, so it is valuable to know the differences in recent Korean generations. In South Korea, a generational group is more defined by its shared experiences than by a specific number of years. For instance, older Koreans who lived through the Korean War and its aftermath are more conservative, strongly allied with the U.S., and uncompromising towards North Korea. In contrast, a group called Generation 386 (comparable in some aspects to American baby-boomers) grew up in a period of great student unrest and has a tendency to be more socially-conscious and liberal than their forbearers. 386, no longer a chronologically accurate term, stands for Koreans in their 30s, born in the 60s, and educated in the 80s. An example of their growing influence is the April 2004 parliamentary election, which saw the decline of the older conservative Grand National Party and the emergence of the reformist URI party composed...

Today I digress from my usual dialogue on the dynamics of Korean-American business. Several years ago, one of my Korean colleages invited a group of his American friends and families to his home in New York for a 4th of July picnic. I, too, was invited. As is typical for a picnic, the Americans brought traditional food and drink to share—beer, soda, watermelon and potato salad, along with a wide variety of snacks. My Korean friend had told everyone he would be handling the BBQ. To many of the guests they were surprised to find out that the BBQ consisted of Kalbi-Korean rib eye steak mariated in a liberal mixture of garlic and spices. Having eaten Korean BBQ on a number of occations, I was pleased to see we were to have kalbi. However, from the expression on some of the Americans, I could see a degree of apprehension and thoughts of “where are the burgers?” That soon changed when one-by-one even to most reluctant guests tried the tasty kalbi. In no time, everyone was a conver...

LG Group, the South Korea second-largest conglomerate, ended a 57-year alliance of the founding Koo and Huh families with an amicable reorganization of the holding company. A new entity GS Holdings took charge of the group's nine energy and distribution units, including LG-Caltex Oil Corp., LG Mart Co. Ltd. and LG Home Shopping, to become the nation's seventh-largest conglomerate with assets worth $13.8 billion. The new entity is named after the firm’s former trade name Gold Star. GS Holding will be under the control of descendents of Huh Joon-koo. The Koo family will continue to control the original group holding company LG Corp., with its flagship manufacturing units LG Electronics Inc. and LG Chem Ltd. The leaner LG Holding Group will retain $40 billion in assets. The voluntary reorganization followed a board decision in May to enhance specialization in each business sector and improve management efficiency. Analysts said corporate transparency will be strengthened.

South Korean Foreign Minister Ban Ki-moon and North Korean Foreign Minister Paek Nam-sun met Thursday and issued a joint press statement prior to the 11th Asean Regional Forum in Jankarta, Indonesia. This is the second time the foreign ministers of the two Koreas have issued joint statement--the first one occurring in 2000. The statement recognized that both sides understand the need to foster cooperation and exchanges. According to Chosun Ilbo the two sides reaffirmed that the 2000 Joint Declaration, the fundamental building block for intra-Korean reconciliation, cooperation, and peaceful unification. A key aspect of the new press statement is the shared understanding that a peaceful resolution of the nuclear issue through the six-party talks would contribute to the stability on the Korean Peninsula and promote inter-Korean economic cooperation. In a related story, North Korea had a meeting with U.S State Secretary Colin Powell on Friday, July 2 at the Asean forum. ...

As predicted, the unionized workers of Hyundai Motor reached a tentative agreement with management on wage hikes and working condition. This concluding a five-day strike although workers will finalize the contract in a vote on Monday. Among the terms of the agreement: Regular workers' wages will increase by $85 more per month. The company will also build up a social contribution fund for the development of the region. With regard to the five-day workweek issue (See June 30th Blog) Hyundai had already implemented the shortened working hour system since last September regardless of the government policy.