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 123^rd 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 2^nd 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 8^th 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.

Regards,

H.S.