From scratch to #1 shipbuilder

Economy

Published: 15 Feb. 2009, 23:24

From scratch to #1 shipbuilder

“Faces inside Korea’s conglomerates” is a weekly series about key figures in major conglomerates to help readers understand Korea’s business world.

The Hyundai Heavy Industries Group, now the world’s biggest shipbuilding conglomerate, started on an empty stretch of beach in Ulsan in the early 1970s.

President Lee Myung-bak, Representative Chung Mong-joon of the Grand National Party, left, and Hyundai Heavy Industries CEO Min Keh-sik, second from left, at the ground-breaking ceremony for the shipbuilder’s Gunsan shipyard in May 2008. The shipyard will be completed in June. JoongAnd Ilbo

There is a well-known story about how the founder, the late Chung Ju-yung, persuaded a British bank to provide loans to an unfamiliar Korean company with no shipbuilding experience. Chung recalled that he showed not only his plan but also a picture of the Turtle Ship, a historic warship of the Joseon Dynasty, on a 500-won Korean banknote to describe the nation’s long history of shipbuilding to the head of Barclays Bank.

Min Keh-sik (67)
Hyundai Heavy Industries vice chairman & CEO/CTO
Bachelor’s in naval engineering,Seoul National University
Doctorate in ocean engineering,MIT

After securing funds and technology transfers, Hyundai Heavy finally built its first two ships, 260,000-dwt crude carriers, in 1974.

Today, Hyundai Heavy Industries Co., the flagship company of the business group, is the world’s top shipbuilder, according to the U.K.-based shipping service group Clarkson. Its affiliate, Hyundai Mipo Dockyard Co., is the world’s fifth largest shipbuilder. And the business group with 15 units is Korea’s seventh biggest conglomerate, if current or former state-run conglomerates are excluded.

Hyundai Heavy Industries Co. marked record annual sales and net profit last year of 20 trillion won ($14.24 billion) and 2.2 trillion won respectively, despite the global financial crisis. It also received orders worth $28.2 billion last year, up 13 percent from 2007.

But orders worldwide have been shrinking sharply since the fourth quarter, not only due to the global credit crunch but also due to a correction to the recent shipbuilding boom.

The company may be positioned to weather the storm.

Jeon Jae-cheon, an analyst at Daishin Securities, said in a recent report, “Hyundai Heavy has a well-diversified business portfolio, including high-value-added tanker construction and alternative energy business such as solar photovoltaic module manufacturing.”

With the domestic economy sluggish last year, Hyundai Heavy Industries began an advertising campaign featuring a video of the late Chung telling university students the episode about the establishment of the shipbuilder.

The ad succeeded in evoking Koreans’ nostalgia for the times of rapid economic growth and bold challenges in the 1960s and 70s.

The ad ranked third in the list of the corporate ads that left the best impression last year, according to a poll on 1,200 people by Korea CM Institute, a marketing research agency.

Today, Chung Mong-joon, the sixth son of the founder Chung and a lawmaker from the governing Grand National Party, is the largest shareholder of the conglomerate.

However, he does not intervene in the day-to-day management of the shipbuilder.

The business group is being managed by professionals, mostly people who majored in naval, electrical or mechanical engineering at university and have accumulated experience in the shipbuilding field.

Min Keh-sik, head of the business group and chief executive officer of Hyundai Heavy, is a case in point. Min earned a bachelor’s degree in naval engineering from Seoul National University and a doctorate in oceans engineering from Massachusetts Institute of Technology. He has published 180 papers in local and overseas journals and won 220 local and foreign patents. Min, nicknamed “the silver-haired marathoner,” has run 200 full marathons. He has worked from overtime nearly every day for 20 years to develop new products, according to company officials. He was recruited by founder Chung in 1990 from Daewoo Shipbuilding & Marine Engineering.

The business group has many other executives who majored in naval engineering in SNU.

One of them is Choi Kil-seon, president and CEO of Hyundai Heavy. He joined the company in 1972, when the ground-breaking ceremony for its Ulsan shipyard was held. He served as president of Hyundai Samho Heavy Industries Co., and Hyundai Mipo before landing his current position in 2004. He now focuses on development of the shipbuilder’s new growth engines, including offshore plants and renewable energy business.

Song Jae-byoung, the current president and CEO of Hyundai Mipo, is also an SNU graduate with a degree in naval engineering. He has endeavored to remake shipbuilding systems so that mass production can be made possible in a limited site and to extend business scope to construction of high-value-added ships, such as Pure Car/Truck Carriers. Under his leadership, Hyundai Mipo is establishing itself as a shipbuilder focusing on high-end mid-size vessels.

The flagship company, Hyundai Heavy, which accounts for three quarters of the business group’s total sales, has four important senior executive vice presidents under the two CEOs.

Among them is Choe Weon-gil, who leads the shipbuilding business division. He has worked for the shipbuilder since 1972 and been involved in various areas, including planning and marketing. He has been leading the construction of the company’s Gunsan shipyard in North Jeolla. He is said to have an efficiency-oriented Western management style that does away with unnecessary meetings and grants more autonomy to workers.

Oh Byeong-uk, head of the offshore plant business division, is an expert in planning who helped the company develop the technology for construction of large vessels on land. In addition, his fluency in English has helped him become an expert in negotiations with ship buyers, company officials say.

Yoo Seung-nam, who leads the engine business division, helped the company’s annual large engine production exceed 10 million horsepower last year for the first time in the world.

And Kim Young-nam, head of the electronic system business division, has helped that business expand. He now focuses on parts manufacturing for solar photovoltaic power generation and wind power, the company’s new growth engines. Kim and Choe both majored in electrical engineering at SNU.

Among other senior executives is Hwang Moo-soo, CEO of Hyundai Samho. In 1994, Hwang helped Hyundai Heavy successfully build a liquefied natural gas carrier for the first time among local shipbuilders.

And there is Choe Byeong-gu, executive vice president of Hyundai Heavy. He is leading the construction equipment business of the shipbuilder.

Lee Choong-dong, executive vice president of Hyundai Heavy, also has an SNU bachelor’s degree in naval engineering and a doctorate in structural engineering from the University of California, Berkeley. Lee has led various research and development projects ranging from improving the structural soundness of ships and offshore plants to industrial robot intelligence.

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