Thoughts on Korean Business by Don Southerton

Hyundai Motor announced on Thursday October 28 that it achieved revenues of $5.82 billion, operating profit of $412 billion, and net income of $519 million for the third quarter 2004. Compared to the same period last year, revenues increased by 9 percent, operating profit by 34.9 percent, and net income by 11.7 percent. The HMC cited as the reason for the firm's increased profitability on an increase in exports of sedans amid improved exports. On another level, most of Korea's leading conglomerates including HMC, division-by-division, department-by-department, now focus on their profitability versus market share and growth as in the past. The former drive for growth and market share is seen as a major contributor in the disastrous Korean fiscal meltdown of 1997. The accumulative HMC sales during the nine month of this year were 1.199 million cars -- 405,367 for domestic sales and 793,578 for overseas sales. The domestic car sales decreased by 16.4 percent from 485,000...

Two Korean high-tech firms, Samsung Electronics and LG Electronics, are continuing to drive up Korean exports through cell phones sales. In fact, cell phones now account for more than 10 percent of Korea's exports. The two firms, which ship up to 90 percent of their cell phones offshore, gained ground over the past three months in the global handset market, while eroding Motorola's market share Samsung, the world's third-largest mobile phone maker, shipped 22.7 million handsets during the third quarter, closing the gap with runner-up player Motorola's 23.3 million units. LG is expected to climb the global ladder two notches to fourth place, selling 11.8 million handsets to pass Sony-Ericsson's 10.7 million units. Nokia leads the pack shipping 51.4 million units in the third quarter.

In the mid 1990s, Hyundai Group founder Chung Ju-yong planned to build an integrated iron and steel works in South Gyeongsang Province. The Korean fiscal crisis of 1997 and an impasse with President Kim Young-sam’s administration stalled those plans. The late founder's son and current chairman of Hyundai Automotive Group Chung Mun-koo, building on the success of the automotive company, is fulfilling the decade old family plan to move into the iron and steel industry. Chairman Chung Mong-koo announced that the company plans to establish an integrated iron and steel making unit, beginning with the construction of a shaft furnace at the company's newly acquired Hanbo Iron and Steel works. The chairman noted that it was difficult to produce the world's best cars, without first independently producing steel products. Hyundai Motor now imports some steel products from Japan in order to manufacture auto parts. I see this move critical in securing Hyundai position as the...

Chosun Ilbo, a major Korean newspaper recently reported that Korea's department stores are setting up cosmetics and accessory corners exclusively for men. For example, Hyundai Department Store’s COEX location is opening a specialty store for men’s beauty products on the men’s apparel floor. The store features male exclusive cosmetic brands such as Bulgari, Polo, Aveda, Clarins for Men, Hera Homme, Biotherm Homme and Lancome Homme. Lotte Department Store opened an exclusive men’s accessory shop at its flagship store and at the Jamsil and Bundang locations on Aug. 30. The shops sell shirts, ties and a variety of men’s accessories such as purses, belts, hair accessories, keychains and colognes. Are Korean men taking an interest in their looks? One reason might be with a combination of the tight job market and a business enviroment that seeks and fosters younger vibrant men. Many men in their 30s, 40s, and 50s need to be seen at their best. So, many men now turn to comest...

GM Daewoo, Korea's No.3 carmaker, recently unveiled its hybrid sport utility vehicle and fuel cell car challenging its larger rival Hyundai Motor for the nation's alternative fuel car market. GM Daewoo. introduced a hybrid version of its new sports utility vehicle, tentatively named S3X, and the Detroit-based parent company's latest fuel-cell car, Hy-Wire. The hybrid SUV is to be in the domestic market by 2007. Hybrid projects are gaining attention in Korea amid mounting concerns over the rising oil prices. Korea is the world's fourth largest consummer of crude oil. The government plans to offer a tax break on home-grown hybrid cars beginning in 2008. But so far, Hyundai Motor and GM Daewoo, are the only Korean automakers with hybrids in their product pipelines. In early October, Hyundai Motor, Korea's largest carmaker, delivered its hybrid version of Click mini cars to the Ministry of Environment for testing. Hyundai officials have scheduled a 2007 ma...

Korean jobseekers are facing record high competition to land a job at major companies this year. Accoeding to Korea Times local corporations are scaling down their recruiting plans due to economic uncertainties. KT Freetel Co., the nation's No. 2 wireless carrier, said yesterday that more than 8,000 people had applied for its second-half employment while the company plans to hire only 50. The 160-to-1 ratio was the highest ratio of applications to jobs the company has ever recorded and followed last year's recruiting which drew 6,500 applicants for 50 hires, KTF officials said. Other major industrial groups have also been inundated with job applications, with unemployment remaining high. Recent state figures showed that the country's seasonally-adjusted unemployment rate remained at a three-year high of 3.6 percent in August. About half of the jobless are 15 to 29 years old, according to the data. Samsung Group, Korea's largest conglomerate, said it rece...

The trade union of Ssangyong Motor Co. made job security and investment demands to prospective buyer Shanghai Automotive Industry Corp. during its first official meeting with the Chinese automaker yesterday. At the closed-door meeting in Seoul, union officials asked Shanghai Automotive to guarantee jobs and a long-term investment in Korea's No. 4 automaker. China's largest carmaker was selected as a preferred bidder in July to acquire the Korean company. It plans to sign a contract with Ssangyong's creditors by end of this month to purchase 48.9 percent of the company. Ssangyong, which commands about 10 percent of the Korean auto market, came under creditor ownership after the parent Daewoo Group collapsed in 1999 under a pile of debt. It mainly produces sport utility vehicles such as the Rexton and Korando.. Shanghai Automotive hopes to gain Ssangyong's expertise in the SUV segment since the Chinese company does not have SUV's in its product lineup.

Kia Motors Corp., Korea's No. 2 carmaker, has broken ground on its first European plant in Slovakia. According to Kia officials, the company has begun construction on the plant near the northern town of Zilina. It obtained the go-ahead for the project from the Slovak government a day before the construction was started. The Zilina plant is the centerpiece of Kia's drive to expand in Europe. The facility will enable the automaker to sell cars regionally at a tariff rate of 10 percent rather than the current 17.1 percent. Kia will spend more than 1.1 billion euros on the project. Construction is scheduled for completion in 2006. The plant will have annual production capacity of 300,000 vehicles and create more than 2,800 jobs. Slovakia beat Poland to win the Kia investment mainly due to lower labor costs and better transportation infrastructure. The Slovak government also offered tax incentives and free land to Kia. The plant in Zilina will mainly roll out minica...

LG Electronics, Korea will use both English and Korean to help enhance the company's global competitiveness. LG Electronics is the first Korean corporation to officially announce the use of both languages in the company. LG Electronics said that it would begin to use English in writing up documents and handling business with foreign partners from this year. The company added that it would gradually expand the use of English from next year to 2007 and would become fully English-based by 2008. Employees will write major reports, technological documents and emails in English. The company will also establish English versions of the intra-company network, LGenet, and other computer systems related to personnel, accounting, production and sales. In Korea, LG Electronics will implement English language programs across the company and administer stricter English aptitude tests when hiring employees. The decision to use English as a second language at LG is based largely on the...

LG Card Co., Korea's biggest credit-card issuer, said yesterday that it swung to a recurring profit in September for the first time in two years, a swing that should help it trim this year's loss. The card issuer, which narrowly avoided bankruptcy with a creditor-led bailout in January, expected to earn $17.45-$26.18 million in recurring profit each month in the fourth quarter, the company said in a filing to the Korea Stock Exchange. It did not give a profit figure for September. In January this year, creditors and major shareholders agreed to a bailout for the cash-strapped card company. LG Card's creditors, which include the state-run Korea Development Bank, hold about 99 percent of the company's outstanding shares after swapping debt for equity. LG Card and most of the Korean credit card firms suffered losses in the past few years due to massive Korean consumer debt and subsequent defaults. Korean consumer debt is among the highest in the world.

South Korean firms will be entitled to lease properties in the North's Mt. Kumgang resort area. Pyongyang has approved real estate regulations for the resort area located north of the DMZ. The real estate regulations for Mt. Kumgang allow foreigners and their firms, including those from South Korea, to acquire the rights to use land or buildings in the mountainous area. The regulations stipulate that those who legally acquire rights to use land are protected from revocation of the rights within the lease period. In addition, Leaseholders can extend the period of a lease and also transfer leases on land or buildings to a third party. To limit possible speculation on the land, the DPRK’s laws bans any activities contrary to the public interest, such as real estate speculation. The mountain resort is the only tourist spot in the North that South Koreans can visit. A cross-border tour, launched by the Hyundai Group in late 1998, has so far drawn more than 784,000 visitors...

Strategic Vision, a San Diego based research firm released its fall 2004 Total Value Index™ (TVI). The study measures new owners sense of value in their vehicles by factoring all economic issues against the quality of the ownership experience. The study shows that domestics manufacturers continue to have an image problem, as noted by Strategic Vision vice president Daniel Gorrell. In fact, the study suggests that American consumers perceive imports as excelling on expectations of reliability, durability and resale value. Toyota Motor Sales had the most winners, four for Lexus (one a tie) and three for Toyota. Korean imports had the second highest number—three for Hyundai (one a tie) and one for Kia. Hyundai Elantra was the leader in the small car group, Hyundai XG 350 in the mid sized car, and the Hyundai Santa Fe in the small SUV category. The Kia Sedona won top honors in minivans. Adding to a strong product experience for both were Toyota’s strong reliability...

Outback Steakhouse Korea is prospering outperforming the food service’s operations in other countries. Outback Steakhouse, which opened its first restaurant in Tampa, Florida. in 1987, now runs over 1,000 restaurants in 24 countries. Outback Steakhouse Korea is reportedly the top affiliate among all global operations in terms of sales and number of restaurants, with the exception of the U.S. First opened in Seoul in 1997, Outback Steakhouse Korea sales rank first among Korean family restaurant franchises. Outback Korea president Chung In-tae attributes the secret of their success to exceptional service. For example, the restaurant sometimes offers free breakfast to office workers in the morning and for its take-out service, provides appetizers to the waiting customers. At the grand opening of the 50th location in Korea on Wednesday, Chung noted that the company plans to open 20 more locations in 2005. Corporate goals are to hit 100 locations by 2006.

Hyundai Motor Co., Korea's largest carmaker, was ranked No.2 in a recent U.S. auto survey. Toyota Motor Co.'s luxury brand Lexus ranked 1st. The survey by Strategic Vision, an automotive consulting firm, was based on a poll of 74,000 drivers in the United States who were asked about the overall quality of their new cars. Hyundai beat other prominent carmakers such as Mercedes-Benz and BMW to snatch the second place in the survey's "Best-rated Brands" category. "Hyundai scored well because the brand's vehicle quality has improved, its models have a long warranty and they are affordable," a report in USA Today noted

Hyundai Automotive Group through its financial subsidiary Hyundai Capital has launched a financing joint venture with General Electric Co., in a drive to upgrade its Korean auto financing and leasing division. The subsidiary, Hyundai Capital Services Inc., has been revamped as a 62:38 joint venture with GE Consumer Finance. On a visit to Korea said Jeffrey R. Immelt, GE's chief executive officer noted, "We are excited about the future and opportunities to work together to grow on the consumer finance market in Korea. Very rarely does GE do joint ventures and I believe this is the great opportunity to partner Hyundai.” The formation is viewed as a win-win for both Hyundai and GE. Hyundai expects to improve the financial health of the ailing sister company and bring in advanced financial expertise from the U.S. partner. GE is understood to have obtained a foothold in Korea's $ 8.7 billion auto-financing market. Hyundai Capital's chief executive Chung T...

LG.Philips LCD, the world’s leading maker of flat display screens, has launched a massive P6, a sixth-generation production line of thin-film-transistor liquid crystal displays (TFT-LCDs). The company has invested $2.7 billion for LCD factories over the last year and a half. Through this operation, LG.Phillips LCD is expected to strengthen its position as a supplier of the world’s largest LCD. Interestingly, the company has also decided to operate only one production line of the sixth-generation LCD factory and soon move on and operate a seventh generation LCD line currently now under construction. Meanwhile, LG's rival, Samsung Electronics, plans to launch a seventh generation LCD production line next May through a 50-50 joint venture S-LCD with Sony Japan. Therefore, competition in large-sized LCD market is expected to become even fiercer. LG.Philips LCD is a 50:50 joint venture between LG Electronics and Philips Electronics, which formally began operation in 19...