LTW - Greater Wall, Jinro Champs, & Renault Swamp

1. National
1) China extends its Great Wall length to Korea’s former territory
Koreans were not happy at the Chinese government’s announcement that Great Wall’s length has increased to 21,196km(13,170 miles), more that twice of what it was known, because China was adding the length in its Northeastern region of China where Koguryo Dynasty (B.C37-A.D 668) once ruled. Koguryo is considered Korean history by Koreans. Korean scholars think this is part of Chinese government’s Northeast History Project based on the premise that all history that happened in the current Chinese territory is all its own. Korean government said it won’t tolerate a distortion of Korean history and will respond after studying China’s claim more in detail.

Americans better watch out. The Chinese government may even extend Great Wall’s length by another 6,000 miles, claiming it reached as far as New York City because one of its main streets has “Wall” on its name.

2) Korea ranks 42nd in Global Peace Index
According to the Institute for Economics and Peace report, South Korea has moved up eight notches to rank 42nd in the London based think-tank’s 2012 Global Peace Index that measures how peaceful and harmonious countries are. The countries are ranked in seven categories such as international conflict, military expansion, war-time casualties, degree of crime, public security and public order. Iceland was the most peaceful nation, followed by Denmark, New Zealand, Canada, and Japan. Somalia was the least peaceful country, and was preceded by Iraq, Sudan and Afghanistan. North Korea was ranked 149th, just one spot more peaceful than Afghanistan.

It was lucky South Korea’s GPI rank was decided before what happened between me and my wife last Sunday when she came home with a couple Prada handbags in her shopping bag. South Korea could have been a challenger to Somalia otherwise.

2. Economy
1) Jinro Soju becomes world’s bestselling spirit brand
Jinro and Lotte, the two top soju makers in Korea, became the No.1 and No.3 spirits makers in the world, according to a British research firm Euromonitor. It found that Jinro ranked top with sales of 61.38 million boxes, 2.5 times more than 2nd ranked Smirnoff vodka whose sales totaled 24.7 million boxes. Lotte came third with 23.9 million boxes. One box contains 9 liters. While vodka is consumed worldwide, most of soju is consumed in Korea. The combined sales of Jinro and Lotte totaled 85.28 million boxes, meaning 25.6 liters of soju for each of 30 million Korean adults. The WHO put Korea 13th in the world in liquor consumption, but 1st when it comes to strong spirits.

I’ve experienced two major blackouts from too much alcohol in my life. The first was in Oct, 2007 after I had cut 70% of production employees due to significant drop in customer demand. The other was in Feb this year at a wine bar in Barcelona when I drank next to Mr. Amato, the CEO of Metaldyne. I still can not remember what I did or said at the bar, but my colleagues told me I gave Mr. Amato an hour of class on how to run the company.

3. Automotive Industry
1) Renault Samsung keeps falling in the swamp
While Hyundai and Kia keep breaking its production records, Renault Samsung Motors keeps expending its no work holidays as RSM announced again it will idles its plant in Busan for four days a week from June 15 due to excess inventory. RSM plans to work only on Tue, Wed and Fri, letting employees have off on Mon and Fri. RSM’s domestic sales dropped 38.3% on-year in the first five months, and its exports also dropped 20% due to crisis in Europe where 20% of RSM’s exports are being made. RSM is now at the risk of being overtaken by Ssangyong Motors’, the smallest auto maker in Korea, which trailed RSM only by 500 units in May.

There are three problems with RSM. Its line up offers only four models while its competitor Hyundai has 13, Kia with 14 and GM Korea with 10 models. RSM imports many of the components from Japan when high yen is on going. RSM also has to pay 92.9 billion won to Renault and Nissan as a royalty even though RSM made 215 billion won loss last year. Carlos Ghosn may have to have a lot of wine with me.

2) Hyundai recalls airbags in China
Beijing Hyundai issued a recall for 97,542 units of Yuedong, Chinese version of Elantra, produced from Mar, 2008 to Jan 2010, for air bag problems. It was the third major recall for Hyundai in China. The first was with 98,559 units in 2006 for defects in starting devices, and 9,280 vehicles in 2010 for problems in water temperature sensors. Hyundai Mobis and Autoliv are the two major airbag suppliers to Hyundai. Mobis buys many of key airbag components from TRW and Key Safety Systems, formerly Breed.

Quality has been Hyundai’s No.1 policy as its chairman firmly believes the continuous quality improvement ever since he took the ownership in 1999 was the driving force behind Hyundai’s growth from a dwarf to Goliath. I almost got hanged a few weeks ago at Hyundai quality meetings for supplying noisy parts. With the airbag recall announcement last week, a few Hyundai quality people were busy moving around electric chairs.

Regards,
H.S.

LTW - Pro-NK Critics, Electricity Hike, & Japan pays damages

1. National
1) Pro-North Korea followers criticized
President Lee Myung-bak made criticism against those in South Korea who exhibit blind support for Kim Jung-un regime. In his radio address, Lee accused North Korea for denying its responsibilities for the 1983 bombing in Myanmar and the 2010 sinking of a South Korean naval ship, and said he is even more worried about some South Koreans who blindly support the North positions. Lee’s comment came after a month long controversy over Mr.SK Lee and Ms.JY Kim, the hardcore North Korean followers in the Unified Progressive Party who became proportional lawmakers recently through rigged UPP’s internal nomination process. Koreans fear that the sensitive national secrets might be passed on to North Korea through Mr.Lee and Ms.Kim in National Assembly. Confronted with falling party approval rating, the leadership in UPP is demanding the two resign, but they are sitting like 10,000 ton rocks.

There are five subjects pro North followers are brainwashed to keep mum about; Succession of power from Grandpa Kim to father to grand son, self reliance doctrine, political system, human rights and Dear leader. The North followers are, however, instructed to sing at higher decibel than Luciano Pavarotti for any other issues that can threaten the stability of South Korea.

2) Conscripts during Japanese colony win damages
The Supreme Court ruled in favor of eight Korean men who for 17 years have sought compensation from Japanese companies that used them as forced laborers during its colonial era from 1910 to 1945. The court said Mitsubishi Heavy Industries and Nippon Steel the plaintiffs sued are still responsible for paying them wages and damages. It was a historic verdict as it was the first time Korean conscription victims won a court battle against their Japanese employers. Japanese government made an announcement soon after the ruling that the issue of conscripted laborers had been completely resolved in an agreement between South Korea and Japan in 1965. South Korean government is caught in dilemma as the ruling has no validity as Korea’s constitution states the conscription during the colonial days were illegal.

Japanese gave $800 million, a huge sum for Japanese economy at that time, to South Korea in 1965 as a compensation for the suffering of Koreans during the colonial days. This compensation was well spent as most of the money was invested for steel mills like POSCO, automobile plants like Hyundai, electric companies like Samsung and other infrastructures like Seoul-Busan highway. It could have been a disaster if the money were evenly distribute to each of the then 30 million South Koreans. What about compensation negotiation with North Korea? North Korea still got no compensation because of no diplomatic tie with Japan, and that’s one of the key reasons the North fell far behind the South even though it was much more affluent than South Korea until the early 70’s.

2. Economy
1) Electricity price to be hike to dampen its usage
With demand for electricity surging to the temperature rising up, the government is considering the hike of electricity price by 5 percent for both households and industries. The government said it will try to collect 400,000 more kilowatts from private companies’ generators, but it would be too small for the 4.8 million KW more demand expected this summer than last year. Thanks to the lowest electricity price among OECD nations, $0.058/kWh in Korea compared to the most expensive Italy’s $0.258, the average Koreans consume 9,510 KW a year while the OECD average was 8,272 KW in 2010.The government is trying to find ways to curb the reckless consumption of electricity, like air conditioning in the open area. Seoul city is enforcing “short pants, no ties” dress code during the summer.

Korea has to import 100% of petroleum to run the power plants, and its price keeps increasing. It is thus natural that the electricity price goes up, but the government is hesitant because of possible complaints from the people who are used to sweet candies for too long. A Korean saying has it that good medicine tastes bitter, and Koreans need to practice the proverb. More so with Greeks these days.

3. Auto Industry
1) Hyundai retorts against media report on zinc plate steel sheet
Hyundai said it is using the zinc plated steel sheets to build the chassis of cars for both domestic and export from 2006. Hyundai’s announcement came after a local newspaper’s critical report that Hyundai used low cost non zinc coated sheets for domestic models, but more expensive zinc plates for exports. Hyundai said, as of 2011, it has extended the use of zinc sheets, which are 15% more expensive than regular sheets, to include all of its vehicles even though local anti-corrosion requirement is not as strict as that of North America where much more corrosive calcium chloride is sprayed on the road due to heavier snowfalls.

Korean consumers have long suspected that Hyundai’s export models are better than domestic ones. They are not well aware that Hyundai or other car makers build their vehicles to the laws, regulations and the needs of the regions its vehicles are marketed. What’s the use of air conditioner for cars sold in North Pole?

2) Sonata hybrid wins top points in the U.S.
Hyundai announced its Sonata hybrid won the “top satisfaction” award from the U.S. based research company AutoPacific. According to AutoPacific, Sonata hybrid ranked #1 in the hybrid and electric-powered car segment. This car segment was first launched in 2010, with the Mercury Milan hybrid and Lincoln MKZ hybrid as the first winners. The AutoPacific Vehicle Satisfaction Award is an industry benchmark for measuring how owners feel about their vehicles after checking 48 categories covering safety, quality, performance and comfort.

One of the main reasons Hyundai products keep getting recognized by the media is its ever improving quality reputation. We recently had a quality problem that made engines a little bit noisy, and HMC quality engineers landed on Metaldyne Korea at the same speed my wife jumped into a Louis Vuitton store a while ago.

Regards,
H.S.