Wednesday, July 27, 2011

Last two weeks in Korea (Jul 25, 2011)

1. National
1) Japan bans its government official from using Korean Air
The Japanese foreign ministry requested its official not to use Korean Air for one month from July 18 to protest against Korean Air’s test fling of its new Airbus A380 last month over Dokdo(Takeshima to Japanese) located in East Sea (Sea of Japan). On June 17, Korean Air launched an Incheon-Tokyo route with the A380, and a day earlier conducted a two-hour test flight of the A380 carrying journalists from Inchon to over Dokdo. A Korean government official said “Dokdo is Korea’s territory historically, geographically and according to international law, and there is no problem flying our nation’s plane over our territory.” As Japanese diplomats usually ride Japanese airliners, the real impact from the “No Korean Air” measure is not expected to be significant.

The issue of who owns Dokdo(Takeshima) is very sensitive to both Koreans and Japanese, and is a major hurdle in their effort for better friendship. One peaceful solution would be a 12 round boxing match between Lee Myungbak and Kan Naoto. If Lee wins, Dokdo belongs to Korea permanently. If Lee gets knocked out, well, Dokdo still belongs to Korea…….

2) A high rise building rocks to Tae Bo
Thousands of people in the 39-story TechnoMart building in Seoul had to be evacuated for two days when upper 19 floors of the building shook up and down heavily for 10 minutes on July 5. It was a mystery as there was no earthquake, no shabby building construction, or any other suspect that could cause the building to vibrate so immensely. It was found out last week that 17 people exercising Tae Bo were the culprit. Investigator noticed that the vibrometer on the 38th floor suddenly started moving violently when a group of 23 recruited people for the simulation started jumping around in the fitness center on the 12th floor. Investigators said when the natural frequency of vibration of the building matched the frequency of Tae Bo jumping, it gave a big shock to the building because of phenomenon resonance.

The TechoMart was O.K because the vibration was from a few skinny people exercising Tae Bo. Could have been a disaster if it were a bunch of Japanese sumo wrestlers hopping and jumping in anger over Dokdo ownership.

2. Economy
1) Private school whistle blowers make a lot of money
The Ministry of Education said a 37 year old lady became the second-most paid “hagparazzi’, a portmanteau of hagwon(cram schools) and paparazzi to refer to those who report illegal hagwon activities. The Hagwon Law restricts hagwons from holding classes after mid-night and requires the cram schools to abide by the fees they have listed on the web sites of education.  The lady said she has accumulated over 200 million won ($188,600) during the past two years as a hagparazzi. Her golden method is simple. She conceals a hidden camera inside her bag, and she asks hagwon official specific questions to reveal their late-night programs and program fees. She then walks to the Ministry of Education to collect the prize. To produce more whistle blowers, the ministry recently launched classes on how hot become professional hagparazzi.

Obama has often publically praised Korean educational system as he thought it was the key to the miracle of Korean economy. Obama probably didn’t know about the price Koreans had to pay in this education system.  Many students have to leave home around 6:30am, and come home 2:00am the following day, after regular school and hagwon.  Many parents are spending about 30 to 40 percent of their income for their kids’ education. An example? The person writing this Korea update his second son in 2010 when the son was studying hard to enter a university in Korea.

3. Auto Industry
Police arrested 62 Hyundai workers in Ulsan plant over illegal multi-million dollar gambling on the internet during work hours.  There were 13 former and current labor union officials among the arrested. According to the police, the Ulsan workers repeatedly placed bets on illegal internet sports and horse racing games during office hours between Jan 2009 and May 2010, using computers in a staff lounge in the plant. The average amount gambled over the cited period came to 300 million won ($284,171), according to the arrest warrants. One of them placed as many as 700 bets during the period.

Who are the people working in a paradise? Unionized production worker in Hyundai and Kia.  They get a lot of wage, be the last to leave the company even if the company goes down the tube, work in production line that turned into a newspaper proof reading room. Free unlimited access to gambling devices, to boot.

2) JTEKT builds a bearing plant in Korea
JTEKT, a parent company of Koyo Bearings, is building a new bearing plant in Pyeongtaek with 17 million dollar (1.3 billion yen) investment for production launch in the fall of 2012.  JTEKT currently manufactures bearings in Tokushima and ship them to Korea for final assembly in the joint venture company with JICO, Korea’s largest water pump maker.  JTEKT’s Pyeongtaek plant will be competing against NSK Korea  which has been running a plant in Korea for many years. 

Here are a few reasons why JTEKT is building a plant in Korea. Commitment for localization with Hyundai.  Lower manufacturing cost. Korea’s FTA with EU that went effective from July 1. No earthquake, and etc.  The only concern JTEKT might have is the union officials who might turn Pyeongtak into a Las Vegas.



Monday, July 11, 2011

Last two weeks in Korea (Jul 11, 2011)

1. National
1) Pyeongchang for 2018 Winter Olympics
Pyeongchang, a small town with 40,000 people, was chosen as the host of 2018 Winter Olympics, beating Munich and France’s Annecy in the 123rd IOC session in Durban, South Africa. South Korea thus became the fifth nation after France, Italy, Germany and Japan to hose the Summer and Winter Olympics, World Cup, World Athletics Championships and Formula 1. Pyeongchang’s victory came after two failed attempts to host 2010, and 2014 Winter Olympics. The real loser in Durban was not Munich or Annecy, but NBC which now has to worry about falling revenues from prime time commercials because of 14 hours difference between Seoul and New York.
Pyeongchang is located only 130km( 80miles) east of Pyeongtaek where Metaldyne Korea sits.  Metaldyne Korea plans to become a candidate plant to host Metaldyne’s global conference from Feb 9 to 25 in 2018.

2) A marine’s killing rampage leaves four dead
Mincheon Kim, a 19 year old marine corporal, shot and killed four fellow soldiers, injuring two others, at his barracks in Ganghwa Island near DMZ. Kim told the investigators that he had been bullied and physically abused by his comrades. Further investigation revealed the Kim had an accomplice, Junhyuk Jeong, a private who helped Kim get a rifle and ammunition. Jeong got scared and backed off at the last minute before the shooting started. Private Jeong, a devout Christian, had to see his Bible burnt or his private organ torched by his senior soldiers. The two decided to “kill all of them and run away.” It was the worst such incidence since an army private killed 8 soldiers in the barracks with grenades in 2005. Bullying was the reason for the massacre at that time also.
With draft system in Korea, soldiers serve 21 months in the military with less than $100 per month salary. Marines have been popular to recruits as young people believe Marine can make them a “real man” through tough training and discipline. Hazing and bullying are not part of marine training, but they have been tolerated as unofficial training. “Time to put an end to beating and bullying,” according to the words of the marine turned killer corporal Kim.

2. Economy
1) Japanese companies migrate to Korea
Softbank will build a data storage in Busan. Toray held a ground-breaking ceremony for a carbon fiber plant in Gumi. Sumitomo announced plan to manufacture touch panels in Pyeongtaek from next year. Ulvac will put up its first overseas R&D center in Pyeongtaek in January next year. Tokyo Electron is to open its research facility in Hwaseong. These are just a few cases of Japanese firms moving to Korea. The shift is attributable to Korea’s proximity to Japan, and far lower costs in labor, electricity and taxes, in addition to the persistent worries over earthquake in Japan. According to Korean government, the Japanese investment in Korea went up 40% on-year in the first half of this year to 400 billion won ($380M), and expected to continue to rise in the 2nd half.

If I am the CEO of Honda or Toyota, I would build a plant in Korea right away. Korea has quality infrastructure that put Hyundai one of the top ranker in J.D. Powers survey, labor cost about half of what is in Japan, equipment builders that can make machinery as precise as Japanese ones, and the customers who have much higher respects for Accord or Camry than Sonata. Korea also has auto suppliers who became tough marines through harsh cost structure training given by Hyundai, whether official or unofficial. They haven’t fired shots yet.

3. Auto Industry
1) Hyundai Equus beats BMW and Mercedes in quality
The new Hyundai Equus that launched in the U.S. late last year got a higher rating than the BMW 7 series and Mercedes-Benz S class in J.P. Power 2011 Initial Quality Study, ranking second after Lexus LS in the Large Premium Car category.  It seems customer perception of Hyundai as a premium car manufacturer has a long way to go to change, however, as Equus sold only 221 units in May in the U.S., ranking 8th in the Large Premium Car category. All of Equus sold in the U.S. are powered by V8 Tau engines that won Ward’s 10 Best Engine awards three years in a row.
While Metaldyne Korea is proud to be a supplier of timing chain cover module for Hyundai’s most technologically advanced Tau engine, we keep having a nightmare because of this pride. The Tau timing chain cover module takes only 1.5% of our sales with less than 15,000pcs a year, but it generates about 90% of total quality problems because of Tau’s high quality standard. Well, someone said you can not have tasty sushi all the time……

2) Union attempt in Hyundai Alabama down the tube
While Hyundai Alabama plant pays about $44 an hour while Big 3 pay their union workers average of $58, the UAW still has not been successful in unionizing the plant.  “Hyundai is teaching UAW that car plants that are busy rolling out new cars do not need labor unions. Hyundai workers are reluctant to form unions because they believe the Alabama plant is among the best jobs their as demonstrated by 10 applicants for every job.” said Bloomberg.  The average annual household income in Montgomery is about $9,000 less than the U.S. average, and workers at the Hyundai plant are thought to be lucky. Hyundai Alabama employs 2,100 production workers and around 400 office people.
The bespectacled blue shirt gentleman right behind Chairman Chung is Mr.YD Lim, the current plant manager of Hyundai Alabama. He joined Hyundai in late 1970’s, and has been in paint engineering for most of his career. Chairman Chung visited Alabama last week as in the picture, and promoted Mr.Lim as executive vice president, probably ordering Mr. Lim to keep making Sonata worth more than Pablo Picasso’s art pieces.