Korea Commentary: Car Industry Strikes 2014

Korea Commentary: Car Industry Strikes 2014

By Don Southerton, KoreaLegal.org Editor

Labor issues abound in Korea. None more public than those in the car industry. As for my thoughts on when this year’s Hyundai and Kia Motors’ strike will be resolved…. it’s hard to make a prediction.

My concern is that the Strike vote was late this year, in late August vs. July, and Chuseok is very early this year. Many years, Union and Management conclude negotiations before the Chuseok Fall Harvest holiday, which begins next week on Sept. 6.

Nearly 70 percent of the 47,000 + workers in the Hyundai union voted to strike, joining Kia’s workforce of 30,000.

The Union’s primary demand is that bonuses and other compensations now be included in determining workers’ base pay. Currently this base pay is an hourly compensation. In turn, this wage plus bonus base would be used to calculate allowances for overtime and holiday shift pay and other benefits, such as vacation pay and pensions. The inclusion of bonuses would raise workers’ overall income by an average of 10%.

The Company’s position has been that the ordinary wage/bonus demand should not be part of the current contract talks until there is a final court decision ruling on the issue. The country’s Supreme Court ruled in December 2013 that periodic bonuses and other compensation must be included in workers’ base pay. The court deferred to companies and their unions to carry out specifics of the ruling. Acting in response to the ruling, Hyundai and Kia and the Union entered into its own legal battle over the inclusion. Results of this legal review by the Courts are still pending.

Other key contract issues include an extension of the mandatory retirement age from the current 58 to 60. Frankly, this is an issue with older workers throughout South Korea.

Meanwhile, Renault Samsung Motors Co., the local unit of French automaker Renault S.A reached a tentative agreement on this year’s pay increase, pending a local court’s decision on a sticky labor-management issue on ordinary wages.

In addition, carmakers, such as GM Korea and Ssangyong Motor, decided to include bonuses and other fixed benefits in their ordinary base pay.

My hope is Hyundai and Kia Unions and Management either follow a path similar to Renault Samsung and defer to the courts ruling on the issue of determining the base for ordinary wages or come to a mutual agreement while pushing the vote to after the holiday.

Best case scenario… labor unions and management reach an agreement by as late as the middle of next week. Meanwhile, normal tactics are in play. Shift walkouts are underway as well as planning for a rally planned for outside the Hyundai and Kia Motors HQ.

More to come… as it unfolds.

DS

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Korea Commentary: Car Industry Strikes 2014

Korea Commentary: the Won

Korea Commentary: the Won

So what’s all this concern over a strong Won?

Well, frankly, similar to what Korea facing business experienced in the mid 2000’s, today, Korean-made products are more expensive in other currencies as the Won continues to strengthen. As a result, US Dollar profits repatriated back to Korea are worth less in Won.

Attributed to the strong Won…

1. The strength and stability of the Won compared to other nations’ currencies is driven by sound economic fundamentals in the Korean economy.

2. There is an improved overall global perception for Korea Inc. and their brands. Today there is high demand for products from leading Korea exporters: Samsung, Hyundai, Kia Motors and LG. Korean brands are now seen as market leaders in quality, design and value. The brands also capitalized on a weak Won between the global financial crisis of 2007 and 2012. This allowed South Korea brands to offer greater value and lower price points than the competition and in turn dramatically increased their market share globally.

3. Global investors searching for yield have bought South Korea assets this year.

The Impact of the Yen…
Many countries, including Japan and China, have engineered weaker currencies to help make their goods more competitive.

South Korean carmakers fared well between 2007 and 2011 as the Won fell as much as 50% against the Yen. That trend reversed in the middle of 2012, and the Won’s climb accelerated after Japanese Prime Minister Shinzo Abe came to office, backing a new wave of monetary easing that depressed the Yen.

Countermeasures…
South Korean companies are looking for ways to address the Won crisis, including moving more business overseas, just as Japanese companies did during years of Yen strength. Additionally, for component and parts used in overseas plants they are planning to increase local sourcing vs. exporting Korean parts to the manufacturing facilities.

Meanwhile, in an attempt to reverse a slowdown in growth, policy makers are pumping up the economy through all possible means. For example, the Bank of Korea issued its first rate cut in over a year, lifting South Korea stock prices.

Long Term
There are both long term solutions and challenges to Korea’s economy enduring a cycle of weak and strong Won. First, there needs to be a move to high worth and margin exports (like Apple iPhones, for example) that are less price sensitive. Cost driven value goods with low margins are highly impacted by fluctuations in currency when consumers buy product based on the lower price points.

Second, as noted above, many Korea companies have moved key manufacturing overseas but still export substantial parts they produce in Korea. These operations, too, need to be permanently relocated in the local markets. The challenge here is that the domestic Korean economy would suffer from the loss of jobs and industry.

All Said
As in 2006, I feel that most Korean firms approach to the Strong Won will be to push the company to reduce cost and “boost productivity.” That means ” work harder.”
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Korea Commentary: the Won

Korea Commentary: Chaebol Succession

Korea Commentary: Chaebol Succession

By Don Southerton, KoreaLegal.org Editor

Recent Korean media has highlighted accounts of Succession moves within the Korean chaebol such as the Hyundai Motor Group and Samsung. This has included a round of restructuring with smaller sister companies merging to strengthen key companies within the Group.

As I have shared in chats, this comes as no surprise and is part of a long term strategy built around two words—Work Funneling.

In this process, most Korean chaebol families have considerable ownership stakes in many of the privately-held sister companies.

Next, the other subsidiaries give these smaller companies a huge amount of business to increase their revenue. Finally, these smaller companies grow considerably over time and can move to an IPO or sell some of their holdings to outside investors.

The families can then use the revenue stream to buy stock in other key publically traded subsidiaries and their chaebol’s defacto holding company. This ownership stake along with circular, cross and pyramid (radiant) shareholdings give them direct and indirect control over the entire Group.

That said, despite the chaebols’ dominance and influence, they are increasingly coming under pressure from new laws and regulations designed to increase financial transparency and accountability of family members.

For instance, the government recently enacted a “deemed inheritance tax,” so that family members can’t get around South Korea’s inheritance tax laws, and has revised commercial laws to tighten requirements for reporting internal transactions.

Questions, comments, concerns? Feel free to ask.
More to come as I prepare an update on my take on a strengthening Korean Won to US Dollar, as well as what I perceive as a timeline on this year’s Union strikes.
DS

Korea Commentary: Chaebol Succession

Korean CEO Tenure

Korean CEO Tenure

By Don Southerton, KoreaLegal.org Editor

I often share that non-family Korea CEO tenure being considerably less than their overseas operations.

By comparison internationally the non-Korean CEOs tend to stay in the job lots longer … and a more performance based model.

Of course, the organizational dynamics in Korea with everyone in the ranks ever-moving upward forces those at the top out to make room for the next generation.

This excerpt notes CEO tenure at many of the top Korean Groups.

SEOUL, July 30 (Yonhap) — The average term in office of South Korean CEOs is 2.63 years, shorter than the minimum three years endorsed by the country’s commercial law, a finding by a local corporate research firm showed Wednesday.

The report was compiled by tracking the tenures of 576 CEOs at listed companies belonging to the country’s 30 largest conglomerates from 2000 onwards, CEO Score said. The results exclude chief executives who actually run the conglomerate or are family members of these tycoons.

The data showed that 367, or 63.7 percent of the total, stepped down in less than three years, with 102, or 17.7 percent, staying on for less than a year.

CEOs at Hyosung Group had the shortest term, 17 of them staying on the job for an average of 1.7 years during the measured period.

Mirae Asset and CJ had 1.79 and 1.97 years, each.

Others such as Kolon, Hyundai, KT, GS, POSCO, Doosan, Kumho Asiana and Dongbu had CEOs staying for less than 2.6 years on average

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Korean CEO Tenure

US Korea Connect and Golf

US Korea Connect and Golf
US Korea Connect and Golf

 

Success Stories

US Korea Connect and Golf
Golfsmith
Austin, Texas
Profile Golfsmith International, based in Austin, TX, is a specialty golf retailer operating in the U.S. and Golf Town stores in Canada. The business operates as an integrated, multi-channel retailer. Golfsmith International offers extensive product selection of premier branded golf equipment as well as its proprietary products, club-making components and pre-owned clubs.
Exports The popularity of golf in Korea presents a major opportunity for Golfsmith to expand into the market, which they did in 2013 by signing a definitive licensing agreement with Seoul and Daejeon headquartered Golfzon Co. Ltd. to create a retail chain in Korea under the Golfsmith brand. At its locations in Korea, Golfsmith offers a selection of popular golf brands with a focus on U.S. sourced products. In addition to clubs, balls, shoes, tees and other golf essentials from brands like Titleist, PING, Callaway, TaylorMade, Cobra, PUMA, Nike Golf, and more, Golfsmith Korea locations offer a wide selection of authentic golf apparel brands and fashions not found in Korea.
Growth Golfsmith is the world’s largest specialty golf retailer. By expanding into Korea, which has around 3 million golfers, the company puts itself in a position to continue leading the industry. Korea’s golf-related market has an estimated worth of more than $15.7 billion. In addition to its current location, Golfsmith will continue opening more locations in Korea over the next several years.
Lessons Learned: Golfsmith International’s first retail venture outside North American success was ensured by partnering with Golfzon and its keen understanding of the local Korean golf market. Moreover, Korea’s free economic zones as something not to be overlooked by companies seeking expansion into the market. Currently, Korea has eight such zones, which encourage foreign investment through tax incentives, reduced regulations such as tariffs and high-quality administrative services and infrastructure designed to attract an international audience through benefits as advanced as ultra-modern airports and as simple as English-language traffic signs.

http://www.uskoreaconnect.org/business-connect/success-stories/golfsmith.html

US Korea Connect and Golf

Korea Herald: Author Southerton Calls for New Growth Approach from Hyundai Motor

Korea Herald: Author Southerton Calls for New Growth Approach from Hyundai Motor

[HERALD INTERVIEW] AUTHOR CALLS FOR NEW GROWTH APPROACH FROM HYUNDAI MOTOR

2014-04-30 20:51

“Speed” is the key to explaining Hyundai Motor Group’s stunning growth over the past decade. The rapid decision-making under the charismatic leadership of chairman Chung Mong-koo has been crucial for its global expansion.

But Don Southerton, author of the recent book “Hyundai Way: Hyundai Speed,” says a more cross-cultural approach is now needed for the Korean auto giant to keep going at its current speed.

He recalled a 2005 training session he held at Hyundai Motor’s newest plant in Montgomery, Alabama, where tensions were mounting between the American and Korean teams ahead of the production of their first vehicles at the facility.

“The problem was ‘cultural’ ― Koreans not understanding and Americans vice versa,” Southerton, who is also leading a Denver-based consulting firm, Bridging Cultural Worldwide, wrote in an email interview with The Korea Herald.

According to him, many of the new American managers had been searching in earnest for the “Hyundai Way” ― documented policies and procedures that would guide them in decision-making and day-to-day work.

But not finding a set “Hyundai Way” resulted in some Americans feeling that there might be a communication and language issue. “More concerning, a few hinted strongly at trust issues and that Koreans were deliberately withholding vital information,” he said.

He wouldn’t say this cultural issue was limited to Hyundai. Other multinational companies like Coca-Cola and IBM that have a long history of dispatching expatriates worldwide have always experienced such difficulties.

“But unlike American companies like Ford, GM and Chrysler that have highly standardized and documented policies and procedures, at Hyundai these were acquired on the job and over time, shared informally through mentoring,” he said.

He pointed out even some Korean employees experience this issue.

“In the past … an employee joined the group as their first job and moved up through the ranks. Today, greater numbers of Korean team members are joining the group after years of employment with other firms. Like Westerners, it takes time for them,” he said.

“As more and more Hyundai operations and sales have shifted globally, the need to localize to each market has been crucial. I feel Hyundai is constantly evaluating what works best for each market. In some markets leadership is Korean, in others leadership is local.”

He suggested that what works best is when both the Korean and local leadership are strong collaborators. As for the hiring of non-Koreans for local leadership roles, like in any international operation, or in the case of Peter Schreyer, the group’s design chief, the decision would be based on the individual’s experience and reputation.

“I also feel one management change occurring is a shift from the top-down management to one of collaboration,” he said of the ongoing leadership transition from the current chairman to his son Eui-sun, the vice chairman.

By Lee Ji-yoon (jylee@heraldcorp.com)

See LINK

Korea Herald: Author Southerton Calls for New Growth Approach from Hyundai Motor

Hyundai Way: Hyundai Speed–The Update

Hyundai Way: Hyundai Speed  The Update

Very pleased with the considerable international interest in Hyundai Way: Hyundai Speed.
I’m replying to folks worldwide and providing them PDF copies.

 Hyundai Way: Hyundai Speed  The Update

Interested in a copy? Just ask. One condition–you need to share to PDF Hyundai Way: Hyundai Speed  The Update

 

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Hyundai Way: Hyundai Speed  The Update

Hyundai Way: Hyundai Speed, New Book Looks at Korean Corporate Culture

Hyundai Way: Hyundai Speed, New Book Looks at Korean Corporate Culture

Global business expert Don Southerton has authored a new eBook, Hyundai Way: Hyundai Speed, which shares insights into the one of the world’s top automakers.

 Hyundai Way: Hyundai Speed, New Book Looks at Korean Corporate Culture

Korea global business expert Don Southerton has released his latest publication, titled Hyundai Way: Hyundai Speed. Southerton notes, “In the wake of the recent accomplishments of the Hyundai Motor Group and specifically the Hyundai Motor and Kia Motors brands a question is often raised, ‘What makes Hyundai so successful?’ I tackle this question from a cultural perspective.”

The author points out his objective for Hyundai Way: Hyundai Speed is to share insights into the Hyundai Motor Group—a unique inside view of a unique corporate culture.

In addition to the growing number of Hyundai and Kia Motors enthusiasts wishing to learn more about the carmaker, Southerton sees several target audiences for the book. First for the global teams working for the Hyundai Motor Group and its affiliates, Hyundai Way: Hyundai Speed will build upon their current experiences, while providing new understandings.

A second audience is firms and vendors providing services or products to the Hyundai Motor Group. This book will be beneficial in strengthening and maintaining the relationship.

A third readership is companies with significant Korea-based business. Although the book offers specific insights into Hyundai Motor, the broader content can apply to many Korean firms in sectors outside automotive.

The eBook is available through iBook, Kindle, Nook, and Amazon.

About the author

With over 35 years’ experience, Don Southerton is the definitive authority on Korean-facing global business, strategy, branding and market entry–from automotive, golf, retail, and QSR/ food sectors to New Urbanism and Green technology.

Building on a life-long interest in Korea and the rich culture of the country, Southerton writes extensively and provides commentary to the media on modern Korean business culture and its impact on global organizations. This is his thirteenth publication.

LINK  PRWEB Press Release

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Hyundai Way: Hyundai Speed, New Book Looks at Korean Corporate Culture

Hyundai Way: Hyundai Speed, Part 1

Hyundai Way: Hyundai Speed, Part 1

Hyundai Way: Hyundai Speed

An New Article Series by Don Southerton

Introduction

The Hyundai name and brand have steadily gained global recognition. Established in the late 1940s, Hyundai’s growth over the next decades paralleled South Korea’s rise as an emerging and vigorous economy. By the early 2000s the highly diversified Hyundai Group restructured and split into a number of independent and specialized units, including Hyundai Heavy Industries (HHI), Hyundai Merchant Marine (HMM), Hyundai Engineering and Construction (HEC), and Hyundai Motor Company (HMC). As Hyundai Motor expanded into a highly integrated auto manufacturer composed of numerous sister companies and subsidiaries, the name, too, evolved. By 2011, with the latter company surpassing the original organization and former affiliates in overall global success, it was renamed the Hyundai Motor Group with focus on three growth engines—automotive, steel, and construction

To avoid confusion, I use Hyundai Motor Group when discussing the mother organization and terms like Hyundai Motor Company (HMC) and Kia Motors Company (KMC) when referring to specific divisions. That said, at times I use “Hyundai” and “Hyundai Motor” in a broad inclusive sense with regard to culture and heritage.

Part 1: The Quest

Hyundai has a rich heritage, a history of overcoming great challenges, and a legacy of bold innovations and positive, forward thinking. “So, what makes Hyundai so successful?” In the wake of Hyundai’s recent accomplishments this is a question often raised, but rarely answered. An objective of this series of articles is to share insights into the Hyundai Motor Group—a unique inside view of a unique corporate culture–as well as sharing my quest to uncover, define, and communicate the true Hyundai Way.

Stepping back to August 2005, I was conducting cross-cultural training and coaching sessions at Hyundai Motor’s newest manufacturing facility in Montgomery, Alabama. In the early months of the car plant operations, tensions between the American and Korean teams were mounting. Production of the first vehicles in a new facility is always a

daunting task. The additional cultural dimensions and language differences only compounded the odds of having a smooth launch. Recognizing the challenges, senior Korean leadership asked if I could provide team-building workshops that would allow the respective managers to better address escalating concerns and issues.

Consensus was that the problem was “cultural”—Koreans not understanding Americans and visa-versa. I had been working across the Hyundai and Kia Motors organization for several years and I had dealt with what I thought were similar situations. However, a few hours into the Alabama workshops I uncovered the true cause of the strained relationship, but it was not what I had expected.

Most of the American teams were veterans of car manufacturing—hand picked because they had been top performers at Ford, Toyota, Nissan, Honda, Mercedes Benz, and GM North American plants. In contrast, the Korean teams were Hyundai Motor Company career employees—most having worked for a decade or more at Alabama’s sister plant in Asan, South Korea.

What surfaced in discussions was that many of the new American managers had been searching in earnest for a Hyundai Way—documented policies and procedures that would guide them in decision-making and day-to-day work. For example, former Toyota managers looked for a model similar to the Toyota Way, while others who had worked for Ford Motor Company sought standard operation procedure manuals (SOPS). Not finding a set Hyundai Way resulted in some Americans feeling that there might be a communications and language issue. More concerning, a few hinted strongly at trust issues and that Koreans were deliberately withholding vital information.

Listening to the group, I had a realization. Over the years working with Hyundai and other Korea-based businesses, I found sharing historic background and differences between Korean culture and other cultures as a proven, effective and commonly accepted cross-cultural learning model. Nevertheless, it became crystal clear to me that what was truly needed in this situation was to clarify and impart an intangible—the Hyundai Way or vision. The problem was that a true grasp of HMC goes beyond in-house corporate value training programs produced by human resources and organizational development teams. PowerPoint presentations and manuals are not sufficient. Instead, understanding a corporate culture is experiential, situational, and acquired over time.

A Shared Mindset

Jumping forward several years… on a number of occasions I have shared my quest to better understand the Hyundai Way (and triggered by the work in Alabama) with veteran Korean staff and executives. Time and time again, I found those long employed by the Company reflecting for a moment and then stating frankly that the Hyundai approach was not easy to explain. For example, one senior Korean pointed out that within Hyundai there are several management styles and approaches to tackling an issue depending on the person’s lineage. Groomed by their seniors, junior members of teams adopt the mentor’s methodology and leadership style—some “hard” and demanding, others “soft” and preferring collaboration.

Another Hyundai executive imparted that the Hyundai Way was acquired over time. He added that, with the exception of some minor differences among the sister companies, the transferring of key people among the companies, such as Hyundai Motor, Kia Motors, and Mobis (the parts and modular division), creates a shared mindset. At a minimum, Korean teams understand the thought process and methods of others across the organization regardless of the affiliations.

The Korean executives did agree that understanding the corporate mindset by both Koreans and non-Koreans working across the organization was vital to the continued success of the Company. My quest has been an ongoing pursuit to define and share that mindset.

Corporate Culture–Art or Science

Defining intangibles, such as a company’s culture, heritage, and core values, is a challenge. Like fish in water, we often fail to “see” our culture and values because they are the mediums within which we work and exist. In addition, even when clearly defined, transferring corporate intangibles across cultural and regional borders is difficult. That said, top global companies do, in fact, recognize the need and find ways to share these intangibles with their teams and organizations.

Building on the strong vision for the organization of the late Hyundai founder Chung Ju Yung(discussed in detail in a future article), we also recognize the powerful influence his son Chairman Chung Mong Koo has had on the firm’s culture. As of this writing the Hyundai Way continues to evolve with the third generation, Vice-Chairman Chung Eui- sun now assuming a key leadership position at HMC.

A Starting Point: Entrepreneurship

In the course of crafting this work, a driving force that continually surfaced was Korean entrepreneurship. Exploring the strong ties between entrepreneurship and Hyundai culture is then a second goal for this series. However, economists accept no single definition of entrepreneurship or one that fits all economies and eras. For example, Alfred Marshall in his 1890 classic Principles of Economics and in other works noted that entrepreneurs were the driving force behind industry, act with limited information, and that entrepreneurship was a rare skill. i In contrast, noted economist Harvey Leibenstein argues that the dominant characteristic of entrepreneurs is their ability to perceive gaps in markets. They then develop new goods, services, or processes to fit those needs. Moreover, Leibenstein points out that entrepreneurs have the ability to innovatively combine various inputs to satisfy the market. ii In turn, esteemed management guru Peter Drucker in Innovation and Entrepreneurship: Practice and Principles found that in some cases, entrepreneurs may not produce a new product but use creative innovation to apply knowledge and technology developed elsewhere to their local market niche. iii

Nevertheless, by combining relevant theories I have arrived at a generalized set of qualities which aptly apply to Hyundai as discussed in this work. Hyundai leadership has a long history as risk takers, organizers, coordinators, gap-fillers, and innovators. They

seek out new ways of approaching a challenge, benchmark against top competitors, and quickly implement new practices.

Global Success

A final goal of this series of articles is to share Hyundai’s global success model— including the challenges of running a highly integrated manufacturing organization with operations worldwide. These challenges are compounded with the Group’s growth initiative of expanding beyond autos to fully integrate steel and construction within the Hyundai Motor Group family. I also provide some thoughts on prospects for the brand’s continued, sustained growth.

In Part 2 of this series, I will explore the ties between Korean and Hyundai heritage with deeply rooted culture and tradition that still strongly impact the modern workplace.

i Alfred Marshall, Principles of Economics 9th ed. (New York: Macmillan, 1961).

ii Harvey Leibenstein, The Collected Essays of Harvey Leibenstein, vol. 2, Kenneth Button, ed. (Aldershot, ii Harvey Leibenstein, The Collected Essays of Harvey Leibenstein, vol. 2, Kenneth Button, ed. (Aldershot, England: Edward Elgar Publishing, 1989). Pp. 254-256.
iii Peter Drucker, Innovation and Entrepreneurship: Practice and Principles (New York: Harper and Row, 1985). P. 211.

 

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Hyundai Way: Hyundai Speed, Part 1

New For 2014: Strategic Services

New For 2014: Strategic Services

A Note from Don Southerton

While my services have been well received and highly valued over the past decade, in 2013, I began shifting focus from training programs and coaching leadership to a deeper role with a few select clients.

In other words, rather than standing outside the organization and giving advice, counsel and perspective, I actively facilitated and supervised projects that addressed the companies’ pressing needs. This approach, built upon my understanding the nuances of Korean-based business and their companies, has proven to be extremely successful for my clients.

This new role was driven from ten years’ of listening to teams and leadership share (and, at times, vent) challenges. Frankly, after listening to this dialogue, I felt that this expanded value-added approach—one clearly within my skill sets —would serve my clients well.

As we begin 2014, I look forward to supporting you and would like to discuss how this new service can help you meet your firm’s strategic challenges.

 Dsoutherton@bridgingculture.com

New For 2014: Strategic Services