Thoughts on Korean Business by Don Southerton

GS Group Chairman Hur Chang-su announced the that the group formed in the split-up between the founding families of LG Group has replaced the signature, smiling 'LG' with its own logo. Hur also announced GS's corporate philosophy, which is to realize dreams of a better tomorrow and raise the quality of life for its customers. "The recent changes, I know, are challenging for everyone. But I urge you to remember that our utmost priority should be to better accommodate consumer needs and become a leader in the energy and retail business," said Hur. Following the break-up with LG Group, GS plans to focus on energy and retail areas. Other 13 other affiliates will undergo changes to adopt the new GS name and logo. Evidence that the split was amiable, Chairman Koo Bon-moo of the LG Group appeared at the announcement to deliver a congratulatory speech. Koo stressed that despite the divorce, the two companies will maintain the best of ties that had lasted for nearly 60 y...

The South Korean government allocated six licenses for land-based mobile television services, which are expected to go live in May. At least three major Korean television stations will be allowed to extend programs to handsets. The television stations were given a May deadline to bring television to mobile handsets in Seoul and other neighboring cities. Mobile television service, also called digital multimedia broadcasting, is designed to beam digital television, audio and data broadcasts to handheld devices via satellite or land-based television airwaves. The South Korean government has allocated a license for satellite-based mobile television services to TU Media Corp., which is 30 percent owned by mobile-phone operator SK Telecom Co. TU Media plans to provide 14 video and 24 audio channels to customers for a monthly fixed rate of $12.60. South Korean industry watchers believe that satellite-based mobile television will penetrate Korean urban areas, streets, and underground tunnel...

Former LG Group firms, GS-Caltex Oil Corp., GS Retail, GS Homeshopping and GS Engineering & Construction Co. announced a month-long event to celebrate the birth of the new "GS" brand. The four GS Group affiliates recently changed their names to "GS" following a split-up within LG Group. The LG Group is now operating as two independent companies, each held together by respective holding companies. According to the Korea Herald, during April in Korea, the companies will hand out prizes that include 20,000 shares of GS Holdings Corp. stocks and even a small apartment in Seoul.

The car financing arm of General Motors will establish a Korean branch. GM the world's largest automaker operates a Korean manufacturing unit--GM Daewoo Auto & Technology. GMAC Korea will become a holding company of GMAC Capital, a joint venture between GMAC and Samsung Card established with an investment of W20 billion (US$20 million) last June. GMAC holds an 80.5 percent stake and Samsung Card the rest. It plans to launch its business this year. GMAC Korea president Bob Fall said that company would offer car financing programs to customers of GM Daewoo. GMAC has $300 billion in assets and earned $2.8 billion in net profit in 2003. GMAC venture is not unique. GE Capital has invested heavily in Hyundai Capital, which finances domestic purchases of Hyundai Motor and Kia Motors cars in Korea.

Amid fears that Korea's top conglomorates might be eventually controlled by foreign invetsors the takeover of Jino, the 81-year-old maker of soju or traditional Korean liquor, is heating up. Jinro is the largest company being put on sale in the domestic M&A market in the first half of this year. Jinro said Monday a total of 14 bidders, including Lotte Chilsung Beverage Co., Doosan Corp., Dongwon Group, Hite Brewery, CJ Group, Daesang Co., Muhak Co., and Taihan Wire, submitted formal letters of intent for the acquisition. Most bidders set up a consortium with domestic or foreign partners to tackle the takeover. Jinro has 55 percent of the soju market, with W700 billion (about US$670 million) in sales and W200 billion (about US$190 million) in operating profit. The acquisition will cost more than W2 trillion. Estimates are that it will take five or even 10 years to recoup that investment. The biggest merit of Jinro is that it has a large distribution network in Seoul and the metr...

Korea Times: Financial firms have carried out drastic and painful restructuring over the past few years and succeeded in cleaning up their balance sheets to emerge a lot stronger. With the unprecedented restructuring designed to streamline their organizations and remove bad assets, the Korean financial industry now looks sounder and more productive than before. But not enough to effectively compete with their bigger foreign rivals. The domestic financial industry is facing another shakeup _ a make-or-break battle with foreign capital. As in the past, financial firms look to be standing always at the crossroads. In this fast-changing financial environment, any financial company that sits idle without adapting to change, will be weeded out. Citigroup, Standard Chartered and other global financial heavyweights are increasing their dominance in the local market, replacing private equity funds, such as Newbridge Capital and Carlyle Group. Newbridge, Carlyle and Lone Star funds entered this ...

Kia Motors Corp. exported its 5-millionth vehicle. Representative of the global aspect of the manufacturer, the car will be shipped to Italy. The new Kia chief executive, Chung Eui-sun, who is also the son of Hyundai Group Chairman Chung Mong-koo, announced Kia accomplishment. Chung Eui-sun said "Today's achievement once again shows the world how much our automotive industry has improved. Kia will continue its efforts to strengthen its overseas sales growth in the future," Korea's No. 2 automaker currently sells cars in 155 countries compared to fewer than 10 in the 1980s. Last year, Kia exported 861,055 units, up 42 percent from the year earlier. Of these, 270,055 vehicles were shipped to the United States. This year, Kia hopes to sell a million cars worth $10 billion, or 3.5 percent of the country's total expected exports. To achieve this goal, Kia is scheduled to unveil the Pride compact, a new minivan code-named VQ to replace the Carnival, a midsize sedan to r...

Hyundai Motor Group Chairman Chung Mong-koo plans a quality checkup of a new U.S. assembly plant in Alabama, slated to begin operation on May 20. The chairman plans to visit the Sonata sedan production line to review manufacturing schedules, the quality of finished cars and the products of partner firms' during a 6-day visit to Alabama. The partner firms operating in the southern state with Korea's largest carmaker include Korean automotive parts makers such as Hyundai Mobis, Dongwon Metals Industry Co. and Hwashin Co. Chairman Park Jeong-in of Mobis, Hyundai Motor's affiliate, and President Suh Byung-kee of the Group's quality division joined Chung on the trip. The team will also visit Hyundai's test track built in the Mojave Desert near Los Angeles for a final Sonata test drives.

During an address to 400 executives gathered at company headquarters in Yeouido section of Seoul, LG Group head Koo Bon-moo announced the adoption of a new management road map that stresses fair play, innovation and thorough brand management. The major Korean conglomerate said it expects the "LG Way" to advance the realization of its goal to become a global top brand. LG has a long-term vision of cultivating the LG name as one of the top three global brands in the group's core sectors of electronics, information technology and chemicals. The announcement on March 22, 2005 marked the 10th anniversary of the LG brand. The business group had originally sold products under the GoldStar label. Interestingly, the conglomerate hopes that the "LG Way" will establish a strong corporate culture unifying its employees. LG recently completed the separation of its operations between the two founding families to end a 57-year-old alliance. The group is now set to rebuild its...

Samsung Electronics announcing it will put out a music phone with built-in wireless LAN and powerful sound system. The new model called the SPH-M4300 wireless LAN music phone would allows users to watch a variety of television broadcast and internet contents. The product is also the first to adopt SRS technology, a 3D sound technology usually used in MP3 players. It is equipped with dual speakers. The latest Windows Media Player is installed so that multimedia content like movies and music can be played. In addition, Microsoft’s mobile operating system Pocket PC 2003 Phone Edition will allow SPH-M4300 users applications such as Outlook, Word and Excel. The phone also includes a 520MHz CPU 1.3 megapixel camera.

Kia Motors announced that its popular van Carnival earned the highest safety rating in the latest crash tests conducted by the United States Department of Transportation’s National Highway Traffic Safety Administration (NHTSA). ``The Carnival earned the top rating of five stars in the NHTSA’s frontal and side crash tests for four years in a row,’’ Kia said in a statement. ``The test results are significant because the NHTSA has a great influence on U.S. consumers in their automobile purchases.’’ The NHTSA named the Carnival, which is sold as the Sedona in the U.S., as the safest van, along with the Chrysler Town & Country, the Dodge Grand Caravan, the Mazda MPV and the Nissan Quest. Kia officials said the NHTSA test will help improve Kia’s image among U.S. consumers. In contrast, earlier this month the U.S. Insurance Institute for Highway Safety (IIHS) survey ranked some of the Korean cars being sold in the United States low in terms of driver safety during accidents. The survey,...

Like Hyundai, LG, and Samsung, SK plans to expand into the U.S. market. For example, the SK Group, operator of the nation's largest oil refiner, is bolstering its efforts to secure its presence on the world market with ambitious plans to become a major global player. According the Korea Herald, reinforcing its commitment to branch out from its three core areas of energy, chemicals and mobile telecommunications in the United States, Chairman Chey Tae-won said he believes further expansion into the U.S. market is crucial for the group's globalization plans. "This is going to be a starting point to build up our global business network," said Chey during a February business trip to the US. He formerly spearheaded the group's mobile communications operation and earlier studied economics at Chicago University in the late 1980s. SK set up a resource and international division to oversee all overseas businesses from the beginning of this year. It will also help the compan...

From Korean Herald Special Report on Mobis Aiming to become one of the world's top 10 automotive parts makers, Hyundai Mobis Co. is increasing its sales of original equipment manufacturing parts, aftermarket parts and accessories overseas. Mobis' worldwide network of distribution centers supply components to global vehicle manufacturers including the Big 3 U.S. carmakers - General Motors Corp., Ford Motor Co. and DaimlerChrysler AG - by using a "just in time" delivery system. In 2010, the nation's No. 1 automotive parts provider plans to earn 5 trillion won in exports and 10 trillion won in domestic sales. "Mobis seeks to achieve this goal through expanding its global supply network and production facilities," said Jang Yoon-kyung, director of the firm's public relations. The company's Overseas Parts Sales Division introduces its products to carmakers, parts makers and parts distributors around the world by participating in automotive parts exhib...

Samsung Electronics is going global with its MP3 player business. The electronics giant hopes to aquire a huge share of the world’s music player market. During a demonstration of its new MP3 players, Korea's biggest electronics company vowed to raise its market share to the mid 20 percent range in the global music player market by 2007 to become the world’s top MP3 maker, overtaking U.S.-based Apple. It unveiled six new MP3 players, including shock-proof HDD players and flash memory players with game functions. The company also plans to aggressively market itself in emerging overseas markets, including China and Russia. It will produce more than 5 million players this year, 4 million of which will be exported. As part of that effort, it will invest US$40 million in overseas marketing and carry out massive promotional activities in China and Europe. The Korean electronics maker sold 1.7 million units of music players last year, while its rival Apple posted sales of 8 million. Sams...

Korean automakers expressed doubt over a U.S. Insurance Institute for Highway Safety (IIHS) survey that ranked some of the Korean cars being sold in the United States low in terms of driver safety during accidents. The survey, released on the institute’s website indicated drivers of Kia Motors’ compact Rio and sport utility vehicle Sportage and Hyundai Motor’s compact Accent face a high risk of death in traffic accidents. The survey said drivers of General Motor’s SUV Blazer are at the highest risk of death. About 308 Blazer drivers per 1 million would die if their cars were involved in accidents. The figures for Hyundai’s Accent drivers were 150 per 1 million and Elantra 88 per 1 million, while the average death rate for all vehicles was 87 per 1 million. Hyundai and Kia claimed the survey lacks credibility because it only considers the number of accidents and the drivers who died. Hyundai Motor officials said the IIHS should have been more careful in conducting the driver safety surv...

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Interestingly, South Korea will begin to provide electricity to the North Korean industrial complex in Kaesong. Ironically, at the end of World War Two when the country was split, the North, briefly and somewhat sporadically, provided electricity to the South. The South-to-North power supply will facilitate the development of the industrial complex in Kaesong, just 60 kilometers north of Seoul. So far, three small- and medium-sized Korean companies have established production lines in the complex. They have produced electricity from their own generators. The lack of infrastructure is one of the biggest challenges ahead for the Kaesong Complex. The state-run KEPCO will supply 15,000 kilowatts of electricity in the first stage but plans to increase the power to 100,000 kilowatts by 2007 when 300 more companies are expected to operate production facilities in the complex. To supply electric power, the corporation set up 220 power poles between South Korea's Munsan sub-station and the ...

GM Daewoo Auto & Technology Co., Korea's third-largest automaker, targets overseas sales of 500,000 cars in 2005. GM Daewoo markets under General Motors' Chevrolet badge. General Motors Corp., the largest shareholder of GM Daewoo, expects the Korean subsidiary to account for about 12 to 15 percent of Chevrolet's worldwide sales, which is projected to reach 4 million units this year, according to John G. Middlebrook, GM's vice president of global sales, service and marketing operations, at a news conference in Seoul. General Motors Corp. owns about 48 percent of GM Daewoo. GM Daewoo's exports last year rose 76 percent to 796,000 units, selling more than 142,000 cars in Western Europe, 219,000 in Eastern Europe and 150,000 in Asia-Pacific, including knock-downs. Most of them were sold under the Chevrolet badge.

Three Korean were listed on the 2005 Forbes World's Richest List. They are Lee, Kun-hee of Samsung, Shin Kyuk-ho of Lotte, and Chung, Mong-koo of the Hyundai Automotive Group. Their fortunes were estmated by Forbes to be $4.5 billion, 1.7 billion, and 1.4 billion, respectively.

SK Group chairman Chey Tae-won succeeded in defending his position as chairman and CEO post at SK Corp., foiling the bid to oust him by Sovereign Asset Management. At an annual meeting held at the Sheraton Grande Walkerhill Hotel in Seoul, 60.6 percent of the attending shareholders, or 55.2 percent of total shareholders, voted in favor of Chey’s re-election for another three-year term. A total of 5,885 institutional and individual shareholders representing 92.1 percent of the company’s entire shares attended the meeting. Chey’s victory is seen as a severe blow to Sovereign. The tax-haven based fund claims Chey's victory will lead to the undervaluation of SK stocks, eventually bankrupting the company.

According to an Korea Herald article, SK Corp., the de facto holding company of SK Group, remains a lightening rod for better corporate governance in Korea. It has not only survived business hardships in 2002 but also led a significant and positive change in business practices, setting a new benchmark for Korea's family-controlled conglomerates. SK Corp. Chairman Chey Tae-won escaped a furious attempt by Sovereign Asset Management Ltd. to oust him last March. One year later, he's facing what appears to be an even tougher battle to maintain his board membership on the nation's leading oil refiner and de facto holding company of the SK Group. A vote on the company's performance is on the agenda at an annual shareholders' meeting tomorrow. But the main focus of the meeting will be whether Chey will be re-relected to the board, which has undergone a determined shift toward independent directors. To be re-elected, Chey will need the presence of a majority of shareholders...

The French daily, Libération, has reported that the fugitive former Daewoo chairman Kim Woo-Choong was in Seoul between late 2003 and early 2004, where he discussed business with the head of a French company. The former Daewoo head stands accused of large-scale fraud. Kim fled Korea in 1999 and Daewoo went bankrupt in 2000. The French paper quoted Robert Lohr, the chief of French railroad manufacturing group Lohr Industrie, as saying he hired Kim as an advisor to do business in Korea. Since 2003 he met the former Daewoo head on three occasions, including once in Seoul. Lohr said he met Kim in a public place in the city, where Kim did not give the impression of being a man on the run. He said Kim was tasked with advising the firm, which aimed to set up a partnership with a Korean company to assemble trains in the country. Thanks to Kim his firm was engaged in real negotiations with three Korean businessmen, he said. The Justice Ministry, which handles immigration, and prosecutors inves...

Korea's Hyundai Motor Co. proudly announced that its Sonata sedan was chosen as the most reliable vehicle by the leading U.S. consumer magazine--Consumer Reports. As a result of its survey of 810,000 consumers on 14 different categories such as engine, transmission performance, the April edition of the Consumer Reports said it selected Hyundai's popular Sonata as the most trouble-free vehicle out of 204 models tested. The magazine also chose Hyundai's subcompact sedan Elantra, XG luxury sedan and Santa Fe sport utility vehicle as recommended models in terms of powertrain performance, driving convenience, safety and fuel efficiency, etc. Over 5.4 million issues of the Consumer Reports are published worldwide by Consumers' Union. Consumers' Union, along with testing thousands of products, conducts a test drive and quality evaluation of all new cars sold in the United States each year.

Hyundai Motor Co. announced it aims to sell 14.6 percent more cars or 2.4 million units in 2005. The Korean carmaker plans to boost domestic sales by 10 percent and exports by 58 percent by increasing overseas production. Vice Chairman Kim Dong-jin made these announcements in Hyundai's annual shareholders' meeting. In response to shareholders' concern over foreigners' selling spree of the carmaker's stocks which began in January, Kim acknowledged that the Korean currency's appreciation against the greenback does have some negative impacts. "However," he said, "we will offset the currency risk coupled with high material costs, by expanding our global sales network and increasing production of Hyundai cars abroad." Currently, one out of every four Hyundai cars is made overseas. The automaker is scheduled this month to start operating a new U.S. plant capable of producing 300,000 cars per year. It seeks to double the annual production in China ...

Hyundai Engineering & Construction (HEC) said it aims to record net profit this year, The firm hopes for a 68 percent increase over 2004. The leading South Korean builder said it has set sales targets at 4.49 trillion won, down 5.1 percent, with operating profit targeted at 394.1 billion won, up 25 percent. Hyundai seeks to secure 7.8 trillion won in new orders this year, up 7.8 percent from the year prior. Following the split up of Chung Jung Yu's Hyundai Group, HEC, the former parent company for the Korean conglomorate was led by the founder's son, M.H. Chung. M.H. committed sucide in 2003 and his wife, Hyun Jeong-eun dispite the threat of take-over by rivall family members, now leads the company.

LG Electronics, Korea's second-largest electronics maker, announced that it took the largest portion of the U.S. CDMA mobile phone market in 2004. CDMA (code-division multiple access) is one of the most commonly used third-generation mobile phone technology. LGE Korea cited figures from a report from IDC, a U.S.-based market research firm, which named LG Electronics as the market leader for the second consecutive year. According to IDC, LG Electronics shipped 15.99 million CDMA handsets to the United States to maintain the lead in terms of market share with 27 percent. In the CDMA phone market, Samsung Electronics Co. trailed LGE with 18 percent and sales of 10.98 million units. Finland's Nokia Corp. was ranked third with a 15 percent and sold 8.8 million handsets.

Korean firms like Samsung are watching closely as China's largest home appliance manufacturer Haier Group Co. moves into the South Korean market via discount and department stores. For example, Hyundai Department Store announced it will hold Haier home appliance promotion sales at two of its Seoul outlets on March 4-13. Haier plans to market mainly household appliances that are not locally manufactured like wine refrigerators and small washing machines. In Korea, Haier has been making inroads through local discount chains like Lotte Mart, Samsung Home-Plus and Carrefour Korea.. The Chinese manufacturer also plans to market small air conditioners costing less than local models. Established in 1984, Haier is China's biggest home appliance maker, occupying over 30 percent of the country's market. In white household appliances like refrigerators and washing machines, the company ranks first in the world, and in the entire home appliance sector including PCs and cellular phones,...

It is thought that Hyundai Motor Group chairman Chung Mun Koo will promote his son, Chung Eui-sun, to head the auto parts subsidiary Hyundai Mobis. Last week, Chung Eui-sun was appointed one of the three presidents of affiliate Kia Motors Corp. For the past two years, the younger Chung has been the senior executive vice president of both Kia and Hyundai Mobis Co. Interestingly, Hyundai Mobis is the holding company of Hyundai Motor with a 14.6 percent stake. In turn, Chairman Chung holds about 8 percent of Hyundai Mobis. In addition, Chung Eui-sun is the main shareholder of Hyundai's three unlisted partner companies, owning 25 percent of auto plant builder Amco Corp., 34 percent of logistics firm Glovis Co. and 30 percent of car electronics maker Bontec. Chung Eui-sun has also acquired nearly 1 percent of Kia Motors. As I noted last week, this consolidation of ownership is quite common among the founding families of Korea's conglomerates. Similar strategies exist with Lee family...