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GS, the young company with a long, strong past

[The faces inside KOREA’S CONGLOMERATES:GS]
Breaking from LG in 2005, the conglomerate has seen sales soar to 34.5 trillion won from 23.1 trillion won

Dec 01,2008
Huh Chang-soo (60) * GS Group chairman * GS Holdings chairman and CEO * Bachelor’s in business administration, Korea University * MBA, Saint Louis University
The faces inside Korea’s conglomerates is a weekly series about key figures in major conglomerates to help readers understand Korea’s business world.

The GS Group is a young, three and half year old conglomerate but at the same time, it is an experienced and stable firm that consists of subsidiaries with long histories.

How is this so?

GS, now Korea’s sixth biggest private conglomerate, was launched at the end of March 2005, as it separated from the LG Group, which is now the country’s fourth biggest. For the previous 57 years, the Huh family, the biggest shareholder of GS, had jointly managed the LG Group before splitting off from the biggest shareholder of LG, the Koo family. It is known as the most successful case of two founding families’ joint management in Korea. The late Koo In-hwoi and the late Huh Man-jung jointly established in 1947 the Lak Hui Chemical Industrial Corp., which is now LG Chem. Then, through the “amicable separation,” as both conglomerates stated in 2005, energy, construction and retail operations of LG were spun off to become the GS Group.

Hur Dong-soo (65) * GS Caltex chairman and CEO * Bachelor’s in chemical engineering, Yonsei University * Doctorate in chemical engineering, University of Wisconsin-Madison
GS has grown sharply since then. Its sales surged to 34.5 trillion won last year from 23.1 trillion won [$15.66 billion] in 2004, with assets also increasing to 31 trillion won from 18.7 trillion won. The debt-to-equity ratio of the group’s holding company, GS Holdings, was very low at 26 percent at the end of the first half of 2008.

“Behind such growth and stability is GS Group Chairman Huh Chang-soo’s management style - harmonious and substance-oriented management. The Huh family’s management style began in the co-management of LG with the Koo family,” said a former LG Group executive who wanted to remain anonymous. “At that time, the Koo family made major business decisions, while the Huh family focused on keeping the conglomerate’s finances sound.”

Huh Chang-soo, 60, grandson of Huh Man-jung, now leads the GS Group as chairman and chief executive officer of GS Holdings. He started his career at LG in 1977 and has accumulated experience working in its chemical, cable and other units.

Huh’s careful management style also was evident in a recent bid for Daewoo Shipbuilding and Marine Engineering. Though Huh had shown a strong desire to take over the world’s third largest shipbuilder in his speeches earlier this year, GS finally withdrew from the joint bid with Posco for Daewoo in October, because Posco insisted on offering a “very aggressive” price, according to GS.

Analysts’ views are mixed on that move. Some say GS was too conservative, a quality that may become an obstacle to the conglomerate’s active expansion, while some others say it was the right move, considering growing uncertainties in the global economy and shipbuilding industry.

Huh’s closest aides are experts in financial affairs who attach great importance to the conglomerate’s financial soundness. The first among them is Suh Kyung-suk, president and CEO of GS Holdings. Suh, a former Finance Ministry official, joined LG in 1991 and contributed greatly to normalizing LG Investment and Securities and other financial service units battered by the 1997-98 Asian financial crisis, serving as CEO of the units. He also led the preparation work for the separation of GS from LG.

The board of relatively young executives includes financial experts such as Lee Wan-kyoung, vice president and chief financial officer of GS Holdings, and Lim Byung-yong, another vice president of the holding company. Lee served as executive in charge of financial affairs in various units of LG. Lim is a lawyer who has a master’s degree in tax law.

Chung Chong-soo is another important manager for a GS subsidiary. He serves as president and CEO of GS EPS, a power generation unit. He is an expert in business and marketing, as he worked in related fields for GS Caltex, an oil refining unit, for more than 30 years. With a relatively aggressive management style, he has doubled the scale of GS EPS since he took the current position in 2005.

And Woo Sang-ryong, president and CEO of GS Engineering and Construction in charge of plant business, is the top contributor to the recovery of the builder’s plant operations from the aftermath of the 1997-98 Asian financial crisis.

Kim Dong-hun, president and CEO of Han Moo Development, which operates the Grand and COEX InterContinental Hotels in Samseong-dong, southern Seoul, won the prize for a record of $50 million in exports from the government last year, for the first time in the local hotel industry.

While such subsidiaries are expanding their roles, the flagship company of the GS Group is still GS Caltex, Korea’s second biggest oil refiner. The refining unit accounted for 62 percent of the group’s sales as of last year.

GS Caltex is led by Chairman and CEO Hur Dong-soo, another grandson of the LG co-founder Huh Man-jung and an elder cousin of GS Group Chairman Huh Chang-soo. Hur is an expert in the energy business as he earned a doctorate in chemical engineering at the University of Wisconsin?Madison and has continuously worked for GS Caltex since 1973. He even has the nickname “Mr. Oil of Korea” in the business world.

Hur has actively forecast and made preparations for changes in the global energy business. He led exports of GS Caltex gasoline to the United States and Japan in 1997, for the first time among local refiners, which focused on domestic sales at that time. He also led the company to make a large investment in upgrading heavy-oil facilities on the expectation that demands for high-value-added oil products would expand. He now focuses on renewable energy business including fuel cells.

The three presidents of GS Caltex have been helping the company make such advances.

Myung Young-sik, president of gas, electric power and resources development, led the construction of GS Caltex’ No. 2 heavy-oil upgrade facilities, the refiner’s biggest project since its establishment with an investment of 1.5 trillion won. Under his leadership, construction was completed in 23 months, whereas construction of such large-scale facilities takes 33 months on average worldwide.

Huh Jin-soo, president of production, is also the younger brother of Chairman Huh Chang-soo. He contributed greatly to converting GS Caltex’s sales focus from domestic sales to exports. Now more than half of the refiner’s products are sold in foreign markets including China, Japan, Southeast Asia and Russia. Based on the performance, he was awarded the Silver Tower Order of Industrial Service earlier this year.

Rha Wan-bae, president in charge of marketing, is a financial expert, as he has continuously worked in financial divisions of GS Caltex since he took a job at the company in 1977. He helped the company obtain credit ratings from global agencies including Moody’s Investors Service and Standard & Poor’s in 1994, for the first time among local refiners, and issue overseas bonds based on the credit ratings.


By Moon So-young Staff Reporter [symoon@joongang.co.kr]



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