LTW - Rocket Fail, Japanese Flocks, 'Note'able Sales, & Renault Problems

1. National

1) N.Korea’s rocket launch fails

North Korean leader Kim Jong-Un’s ambitious plan got botched. North Korea acknowledged 4 hours after the launch on April 13 that the Kwangmyungson-3 satellite did not succeed in reaching orbit. South Korea, Japan and the U.S. urged North Korea to stop the launch as they believed it was just a cover for long range missile test. Barack Obama said he would fold the promised food support for North Korea as Kim Jong-Un broke the promise not to fire the rocket in return for the food plan. The U.N. Council is expected to announce a resolution to condemn North Korea, this time including N.Korea friendly China.

North Korean scientists will investigate why the rocket failed to reach the orbit, and will eventually figure out there was lack of power from the rocket booster. Kim Jong-Un will thus meet with CEO of Pfizer to beg for the donation of million tons of Viagra.

2) Ruling party wins majority in fierce parliamentary election

The ruling Saenuri Party managed to retain majority by winning 152 out of 300 seats. The main opposition Democratic United Party, which was expected to win the election due to public’s negative view on current Lee Myungbak conservative government, garnered only 127 seats. The hero, or heroine, was Park Geun-Hye, who fielded the election by crisscrossing whole South Korea as the front runner for the presidential election in Dec. She accused DUP for changing words as the opposition party is opposing the FTA with the U.S, and a naval base in Jeju Island, both of which were initiated while the opposition party was in power from 2003 to 2008.

Park was immensely helped by Kim Yong-min, a candidate in the opposition DUP, whose dirty comments 8 years ago in internet revealed just a week before Apr 11 election displeased many middle of the road voters. Here are a couple of Kim’s comments. “To reduce terrorism, a serial killer should rape and kill Condoleezza Rice.” “Major TV stations should air pornographic movies for two hours everyday to boost Korea’s low birth rate.” There were a variety of other lewd comments, but I would rather not mention here. Kim got defeated while the price of Dial soap went up 250% last week in Korea due to huge demand to wash Kim’s mouth.

2. Economy

1) Japanese flock to Busan

The office of Haeundae District in Busan said the number of Japanese households moving to Haeundae increased from 5 in 2009 to 39 in 2011. The office said 24 additional households moved to Haeundae from Jan to Mar this year. The office added the Japanese are moving to Haeundae to escape the fear of natural disasters like tsunami or Fukushima nuclear fallout to live in the area that has similar climate and is close to Japan geographically. To boot, the cost of an apartment is only 50% of what is in Japan, and other prices are also much cheaper than in Japan. Haeundae is welcoming the Japanese immigrants, and plans to provide free Japanese language legal advice as well as interpreters in hospitals and road signs in Japanese.

This is not the first time Japanese are coming to Korea in groups. The origin of rivalry between Korea and Japan started in 1592 when Toyotomi Hideyoshi’s forces landed in Busan. Japanese said they would leave Koreans alone if Korea opens the road to China so that the Japanese can invade China, then Ming Dynasty. Being a good friend of Ming Dynasty, Koreans told the Japanese to kiss my butt, and the Japanese did kick Korean butts. The coalition forces of Ming and Korea fought against the Japanese for 7 years in Korean peninsula and at sea, resulting in millions of casualties. This is the war North Korea often cites to compare their blood coalition with China during the Korean War in 1950. To Kim Jong-un’s North Korea, the U.S. replaced Japan.

2) Samsung #1 in Smartphone sales

According to Forbes, Samsung ranked #1 in smartphone market again, taking 28.2% of the global market, selling 41 million smartphones from Jan to Mar. Apple came 2^nd with 22.4% market share, or 32.6 million phones. Nokia and RIM(Blackberry) kept their 3^rd and 4^th position, but their market share kept shrinking, Nokia dropping to 8.65% from 12.5% and RIM to 7.6% from 8.6%. In the 4^th quarter last year, Apple took 23.6%, while Samsung trailed with 23.2%. The star product that turned Samsung #1 again was Galaxy Note, which has sold 5 million units globally since its debut in Nov last year.

I have a Galaxy Note, which is quite big with 145.8mm (5.74 in.) by 82.95mm (3.27 in.) in size, and took it to Metaldyne leadership meeting in Barcelona two months ago in February. My colleagues were really impressed. They wowed that I was carrying a cell phone that was bigger than me.

3. Automotive

1) Renault-Samsung Motors in trouble

While Hyundai and Kia are very busy with their production line running full capacity, RSM is taking too much of break time. To use up excess inventory caused by continuing drop in sales, RSM will suspend production at its plant in Busan from April 20. The car maker saw its domestic sales go down 41.7% to 4,788 from Feb to Mar, while its exports took a dive by 42.8 5 to 8,143 units. It has been struggling due to the poor sales of its large sedan SM7, which was launched in August last year. It sold only 500 units in March. RSM also began to close its dealer shops in Seoul to cut cost, so it is feared it may be the beginning of bad cycle.

The problem with RSM is that they do not have any advantage in the scale of economy. RSM has only one plant in Busan that can make max 300K units a year, and offers only three car models and one SUV as above pictures. RSM imports many parts from Japan which is no good especially when the yen is so high these days, and its models are Nissan or Renault design, which really do not appeal to Korean customers. A good example is SM7 which can not hold 4 golf bags, while most of the people interested in buying SM7 level cars play golf as often as Paris Hilton changes her boy friend.

2) 2012 MVMR to open on May 17 in Dearborn

When I joined Metaldyne in 1999 I thought Metaldyne’s headquarter in Plymouth Michigan was a Hollywood. There was a lady with a look of Liz Taylor, a good looking VP that resembled Tom Cruise, and a R&D director who wore Michael Douglas’s mask. However, no one perfectly matched John Malkovich than Jeoff Burris who was then head of engine products group in Metaldyne. We all know John Malkovich can make a horror movie himself without any makeup. A Perdue graduate, Mr.Burris worked as a purchasing director in Ford until he joined Metaldyne (then Simpson) in 1996. Mr.Burris left Metaldyne in 2003 to work in Magna, and started in 2004 his own Advanced Purchasing Dynamics which provides total service in purchasing sector. His APD successfully held its first Motor Vehicle Materials & Resins conference in 2011, and is hosting another 2012 conference on May 17 at Hilton Double Tree Hotel in Dearborn. (http://www.mvmrcon.com)

Exly

If you happen to meet with Mr.Burris at the MVMR event in Dearborn, please give him my best regards and make sure you tell him I compared him with Brad Pitt or Sean Connery, not Malkovich. Mr.Burris knows too much of my secret……

Regards,

H.S.

LTW - Summit, Dust, World Bank, & Overtime Cut

1. National
   1) Nuclear Security Summit held in Seoul

The 2^nd Nuclear Security Summit was held at COEX Center in Seoul, just 2 km from where I live, with the leaders of 53 nations attending the summit. While the leaders unanimously adopted a communiqué that encourages nations to take all possible steps and cooperate to secure vulnerable weapons-grade fissile material by 2014, critiques said no progress has been made in reality in terms of reducing nuclear materials and that the communiqué is no significant improvement over commitments made during the first one in Washington in 2010 where the U.S., Russia and China agreed to reduce nuclear materials equivalent to 20,000 nuclear weapons and actually lowered to 3,000. The third summit will be held in Netherland in 2014.

While in Korea for the summit, Obama made a visit to DMZ, gazing at North Korean soldiers a few hundreds meters away. Obama thus became the 4th U.S. president to visit DMZ after Ronald Reagan (1983), Bill Clinton (1993) and George W.Bush (2002). The U.S. solider next Obama was in efforts to make sure no microphone was turned on while Obama was pouring colorful F words at Kim Jong-un across the border.

  2) Yellow dust season started

Just as two Metaldyne engineers arrived in Korea for a meeting with Hyundai last Wednesday, the sky turned yellow as this is the time of year when yellow dust from Mongolia and China blow east to cover whole Korean peninsula. Concerns are the sandstorms are occurring more frequently as the regions that generate the yellow dust are experiencing increased desertification as a result of industrialization and logging. In the 80’s, yellow dust hit Korea for an average of 3.9 days, while in the 90’s, it jumped to 7.7. From 2000 to 2011, it increased to 11.8 days. The worst that I have seen was 2006 when most of the schools were closed for a couple days due to thick dust.

While Koreans suffer from sore throats due to jet stream blowing from China to Korea, Koreans should not complain too much about it. If the jet stream blows the other way around, Koreans would be soaked with nuclear dust from Fukushima by now.

2. Economy
 1) A Korean-American nominated as the head of World Bank

Koreans got excited at the news that Obama nominated Korean-born Jim Yong Kim, president of Dartmouth College, to lead the World Bank. Born in Seoul in 1959, Kim moved to the U.S. at the age of five, and got an M.D. degree and a Ph.D. in anthropology from Harvard. Before going to Dartmouth in 2009, Kim was the director of the WHO’s HIV/AIDS department. While the new leader to replace current Robert Zoellick will be selected in the IMF meeting in April, the U.S. nominee gets the job traditionally. Kim arrived in Korea last week, and met with President Lee Myungbak.

It seems Koreans now have accomplished what Genghis Khan had once dreamed about 800 years ago as an Asian. Ban Ki-moon is leading the world politics as the leader of United Nations. Jim Yong Kim will dominate the world money market. Kim Jong-un scares the hell out of the whole world just by toying with nuclear missiles, to top it off.

3. Auto Industry
 1) Government push to cut overtime

According to OECD, Koreans are the busiest bees, working 2,193 hours a year, including overtime, as of 2010, becoming the only OECD nation in which people work more than 2,000 hours. Dutch people work 1,377 hours while industrious Germans toil 1,419 hours, just for comparison. To create more jobs under “job sharing” program, the government is modifying labor laws so that working on holidays is included in overtime as holiday working is currently not included in extended working hours. Under the current labor law, employees are to work maximum overtime of 12 hours a week. If the law is changed to the way the government wants, the companies either have to stop production on weekends or add third shift to run 4 days on 3 days off mode, hiring one third more work forces. Auto industry, which is running full capacity these days, has the most to lose if the new law is enacted.

While business leaders are dead against the new law as it would be a huge financial cost to add one third more people, the workers also do not welcome the new law as their income will be reduced without overtime. Here is what people in the auto industry say to the government. “You are helping me a lot if you do not help me.”

2) Fire in a supplier stops Kia Georgia plant

Kia’s West Point plant in Georgia had to shut down because of a fire at Daehan Solution’s plant nearby on Mar 17. The plant was manufacturing headliners, floor mats, and other noise absorbing materials for Kia’s Optima, Sorento as well as Hyundai’s Santafe. No casualties, but one of the two Daehan Solution’s plants were completely burned down. Daehan Solution’s solution was immediate airfreight of parts from its plants in Korea, and Kia’s Georgia plant resumed full operation last Monday, just a week after the fire. While the fire was a disaster for Daehan Solution and Kia, it gave some relief to other Hyundai and Kia suppliers who were bleeding from air freight cost due to tight production capacity.

  I fully understand the panic Daehan Solution employees had to go through from the fire as Metaldyne Korea had a similar disaster in Aug 2010 when the roof our plant collapsed from heavy rain. We had to work without roof for two months, covering the production line with giant tents as you see in the above pictures. We managed not to stop Hyundai production even a second, but most of our employees lost average 10% of their hairs from the stress. Our HR manager Ken Lee above was definitely the employee most stressed during that crisis.

Regards,

H.S.