LTW - NK Changes, Choi Champ, & Handcuff brouhaha

1. National
1) Wind of change in North Korea
The sun rose in the west in North Korea last week as Mickey Mouse, Winnie the Pooh have entertained North Korean officials, including Kim Jongun and his seemly wife, at a debut concert for the troupe, Moranbong whose members wore short skirts and revealing dress. Highlights and the theme song from “Rocky IV” were also played. Note Rock IV was Sylvester Stallone against Soviet boxer. Experts said the Swiss-educated young leader has different way of thinking from his late father, and just expressed his desire to improve relationship with the U.S. in the concert filled with American characters.
 

Walt Disney thought its intellectual property rights are no Mickey Mouse game as its spokesman said that nobody in North Korea had asked permission to use its characters. Kim Jong-un may retort that Disney violated his trade mark rights by inventing Winnie the Pooh character after copying his grandpa. (Kim Jon-un is joked as the smallest of three bear family among North Koreans.)

2) N.Y Choi wins U.S. Women’s Open
Korea’s Na-Yeon Choi won her first career major championship by capturing the U.S. Women’s Open at Blackwolf Run golf club in Wisconsin last week after beating another Korean Amy Yang by four shots. Choi is the 2nd straight Korean champion of the U.S. Women’s Open after So-yeon Ryu in 2011 and the sixth ever since Seri Pak won the title at the same Blackwolf Run in 1998. Choi thanked Seri Pak for being her spiritual mentor at the trophy awarding ceremony.
    

Choi’s win was a celebration for Daewon Foreign Language High School, as it was the school both Choi and Ryu attended. Choi is two years senior to Ryu who was my first son’s classmate. Despite short history with establishment in 1984, Daewon has become a top high school in Korea. It sends the most graduates to Seoul National University (Korean Harvard), and over 100 students to Ivy League or the same level schools in the U.S. every year. Daewon graduates are tiny cats now with its graduates still young, the oldest graduate being only 43 year old, but will become mighty tigers soon, roaming in forests in Korea and overseas in a few years.

3) Handcuff brouhaha in Pyeongtaik
Seven U.S. military policemen got into an argument with three Korean men over parking in front of Osan Airbase in Pyeongtaik, the same place World Hotel is located, and tried them take into the airbase after handcuffing them. Huge criticism came from all over the place, and there was a fear that it might be another “Anti American candle lights” triggered by the death of two Korean girls by a U.S. military tank during an exercise. American authority at that time looked at it as a simple traffic accident, which was right, and made no apology as they had no knowledge of Korean sentiment over death. (Koreans might mourn at the death of a serial killer.)  The commander of U.S. Forces in Korea made a right decision this time by making an apology saying, “I want to express my sincere apology to the individuals and community affected by the incident.” Things have quiet down quiet after the apology.
  

Working in an American company in Korea, I am often caught in the same dilemma. With all the internet and cultural exchange these days, there is clearly a big cultural gap between Korea and the U.S. Can Koreans understand American companies can stop supplying parts if they are not fairly treated?  Can Americans believe two Korean men can slow dance each other at a night club, and they are still straight?

2. Economy
1) SK Group fined for unfair aiding of its affiliate
SK Group, Korea’s 3rd largest conglomerate, got a fine of 30 billion won ($26.3M) for giving work to its affiliate, SK C&C, a system integration company. The seven SK Group companies were found to have paid SK C&C over 1.7 billion won in service fees since 2008, an unusually high amount, to support SK C&C mostly owned by SK Group owner’s family.  The amount was up to 72% more than other companies would pay to other system integration providers.  This was the first time the government has fined a top conglomerate for excessively supporting its sister company. Other big conglomerates, including Samsung and Hyundai, are also criticized for supporting their smaller affiliates owned by group owners, and this unfair practice is turning into a major issue in the presidential election in December.
 

If you have sharp eyes, you will notice the U.S. Open winner Na-yeon Choi is wearing a SK hat. SK’s original name was Sunkyoung. They changed it to SK in mid 1998, as foreigners thought Sunkyoung sounded like Sunk Young. Another Korean company that needs to change its name is Woori Bank, meaning “Our bank” in Korean. Foreigners may worry about depositing their own money in the Woori Bank.

3. Automotive
1) Doosan Infracore makes big deal with PSI in U.S.
Doosan Infracore announced that it has won a 98 billion won ($85.8 million) business to supply engine blocks and diesel engines to Power Solutions, Inc(PSI).  Doosan will deliver 4,400 engine long blocks to PSI by 2015. The engine long block consists of everything in engine except the fuel systems and ignition systems.  In a separate deal, Doosan Infracore will also supply 800 diesel engines to Clark Equipment within this year.
     

Doosan Infracore has its origin from Chosun Machinery established in 1937 during Japanese colonial days. It changed its name to Daewoo Heavy Industry when Daewoo bought it in 1976, and to Doosan Infracore in 2005 when bought by Doosan Group.  It manufactures construction equipment, machining equipment, and diesel engines. It bought Bobcat in 2007, but got a food poisoning from it as Koreans generally eat dogs, but not cats.  Doosan Infracore began to eat humans. It ate three of Metaldyne Korea’s key employees four years ago, but got no stomach pain so far. Feeling safe, it is now ingesting high number of key engineers from Hyundai’s R&D for various diesel engine developments.

2) Hyundai in strike
Hyundai Union waged a warning strike on Jul 13 and 14 for four hours each shift, the first time in four years. GM Korea and Kumho Tire were also under strike last Tuesday.  Analysts believe the strikes were part of a broader industrial action being organized by the Korean Metal Workers’ union, Korea’s top umbrella union for shipbuilders and automobile companies.  The strike can become a big threat to Korean economy as the auto industry accounted for 13.5% of Korea’s total export for the first half of this year.
 

Much criticism is pouring on Hyundai union’s decision to strike as Hyundai employees are the best paid employees among Korean companies. You keep giving more while they keep asking more, much like my wife. You keep buying her Louis Vuitton handbags, she keeps asking for more Prada bags. My wife should run for Hyundai union presidency next time.

Regards,
H.S.

LTW - Pact Postponed, 20-50 Club, & FTA Benefits

1. National1) Controversial military pact with Japan postponed

South Korea and Japan have concerns on North Korea’s nuclear missiles and China’s growing military power, but have been reluctant on sharing their own military intelligence with the other because of the distrust that dates back to colonial days early 20th century. Interested in strengthening the U.S.-Korea-Japan military cooperation in its strategy to keep China in check, the U.S. has prodded both nations for many years to sign a military pact in which both nations can share sensitive classified information each government has. Tokyo signed on the agreed Jun 22, but Seoul had requested a delay just a few hours before the signing ceremony due to the protest from the angry opposition party who claim the military pact was pursued in secrecy without transparency. It will take a while before Seoul government gain positive response from the politicians and civic groups. 

   

When I learned Japanese many years ago, I was very much surprised that Japanese grammar is very close to Korean. This is probably because of the people in Baekje Dynasty (B.C 18-AD660), southwestern region of Korean peninsula, who migrated into Japan in large numbers, transferring the advanced culture, science and knowledge gained from China. Japanese emperor Akihito said his roots can be traced to Korean blood. Koreans and Japanese will find animosity if they trace history back to 100 years ago, but will find deeper friendship if they go back further another 1300 years.

2. Economy

1) Korea joins 20-50 club

South Korea’s population hit 50 million at 6:35pm on Jun 23, thus becoming the 7th country in the world to join the “20-50 Club,” 50 million people and $20,000 in per capita income. Korea’s population was 25 million in 1960, 40 million in 1983, thus doubling the population in 50 years. Statistics Korea estimated that the population will decrease steadily after a peak of 52.16 million in 2030, falling to 40 million in 2045, and 30 million in 2069. Many fear Korean economy would stop growth due to low birth rate. Korea’s total fertility rate (TFR), the average number of children a woman is expected to bear between 15 and 49 years of age, will stand at 1.23 from 2010 to 2015, much lower than 2.08 for the U.S., or 1.56 for Russia. It is even lower than one baby policy China which has 1.53.  

   

South Korea had pursued strong family plan policy until late 90’s as its land size is about the same as Indiana with 10 million people more than California’s, ranking the 3rd in population density after Bangladesh and Taiwan, if small city countries are excluded. Men were given from condoms at a week long reservist trainings and even exempted from the tough training if they came with a vasectomy certificate. Not sure about young people in reservist training these days, but they might be given free Viagra instead.   

2) Korea benefits from FTA with U.S.

It has been over three months since FTA with U.S. went effect on 15 March. South Korea’s exports to the U.S. have risen 8.4% from Mar 15 through Jun 15 compared to the same period last year, while total exports, excluding those to the U.S., fell 2.5 % over the same period.  Import from the U.S. dropped by 6.3%. A government official said exports of key items like automobiles and petrochemical products to the U.S. increased by 16.8 percent, leading the growth in total value.  FTA with EU was not that much favorable to South Korea, as exports declined by 12.1% while imports from the EU increased by 13.5%. Economists think the recent European crisis was the prime reason for less exports to EU market. 

 

 One of the main reasons for the growth in import from Europe was consumer goods such as handbags, shoes, watches and cosmetics made by European companies which increased its export to Korea by 10 to 30 percent. The recent economic growth in Italy could have been worse had my wife made fewer visits to Gucci and Prada stores in Seoul. 

3. Auto Industry

1) Kia’s 3rd plant got its ground broken

Hyundai-Kia Chairman Chung Mong-koo was in Yancheong in Jiangsu Province in China for the groundbreaking ceremony of Kia’s No.3 plant. The new plant with 300K units a year capacity is to be completed in mid 2014, increasing Kia’s annual capacity to 700K units a year. Kia is running its operation in Yancheong in a joint venture with Dongfeng Yueda Motors. Kia’s sales in China went up from 101K in 2007 to 432K last year.  In the mean time, Mr. Chung will fly to China again next week for the grand opening of Hyundai Beijing’s 3rd plant. With the 400K a year 3rd plant, Hyundai Beijing can now make as many as 1 million units a year. 

   

Hyundai and Kia have their overseas operations all over the world. In the sequence of grand opening, they are India, Turkey, Yancheong, Beijing, Alabama, Slovakia, Georgia, Czech Republic, Russia, and Brazil. However, Hyundai’s first overseas operation was Bromont plant in Quebec shown in the above picture. Its ground breaking ceremony took place on Sep 16, 1986, and grand opening on Jul 4, 1989. Too bad the plant closed in 1993 after the total production of 99,997 units of Sonata, but the Hyundai employees from Bromont were the seeds of the following successful overseas operations.  

2) Hyundai slips in J.D Power quality survey

Hyundai’s quality image got a hit as Hyundai ranked 18th, down eight notches from last year, in JD Power 2012 Initial Quality Study.  Kia maintained the same slot as last year to rank joint 18th with its sister Hyundai. The IQS survey is made of 228 questions that analyzed the number of problems per 100 vehicles reported by car owners. Both Hyundai and Kia had 107 problems, a bit higher than the industry average of 102 problems among 34 brands surveyed. Lexus was the best with 73 problems per 100 vehicles, followed by Jaguar, Porsche, Cadillac, Honda, Acura, Infiniti, and Toyota.

 

What is painful to Hyundai is that it ranked impressive fourth in 2009, but has slipped continuously since then, to 7th in 2010, and 11th in 2011. HMC must be in high alert after the JD Power 2012 IQS report. The hospitals near Hyundai-Kia headquarters are in 24 hours/ 7 days operation mode to treat patients with blue eyes, and broken ribs. 

Regards,

H.S.