Korea’s privatization success story

Chung Joon-yang (61) Chairman Representative director and chief
Representative director and chief executive officer
Bachelor degree, industrial engineering, Seoul National University
Master degree in metal engineering,Sunchon National University

Examining the history of Posco, now the world’s fourth-biggest steelmaker in terms of production, is like examining the history of Korea’s industrialization.

The steelmaker began 41 years ago as a state-run company. The late President Park Chung Hee believed that the key to a developed economy was a strong steel industry. Korea failed to get a loan from the United States to finance the project, as the World Bank said it had little chance of success, Park Tae-joon, the first chief executive officer and now honorary chairman of Posco, liked to recall.

Finally, Posco was established with a portion of reparations that Japan agreed to pay Korea from 1966 and1975 for its previous colonization of the country. Nippon Steel Corp. also agreed to transfer technologies. The No. 1 furnace at the Pohang steel mill started production of liquid iron on June 9, 1973.

In 2000, Posco was privatized, and is now considered a model case of the process. Its sales surged to 30.64 trillion won ($21.81 billion) in 2008 from 10.7 trillion won in 1999, before privatization.

Its net profit also soared to 4.44 trillion won from 1.56 trillion won. It ranked as the second most-admired Korean company in a poll by consulting company KMAC.

But this year will be the hardest Posco has yet faced, as steel demand from automakers, shipbuilders and others worldwide shrinks. The world’s No. 4 steelmaker slashed production in December for the first time in its 40-year history, along with ArcelorMittal and Nippon Steel. The Korean company is expected to reduce production from January to March by a total of 700,000 to 800,000 tons. It produced 33.14 million tons last year.

Still, Posco will “make more efforts in these times to secure an able workforce and expand through mergers and acquisitions, securing long-term growth engines,” Chung Joon-yang, chairman and chief executive officer, said in a press conference last month held after he was approved as the new head of the steelmaker in an annual shareholders’ meeting.

Confirming Chung’s remarks, Posco said earlier this month it would hire 2,000 new workers this year, a level similar to last year, despite the economic slump.

Chung, who has a master’s degree in metal engineering, has worked for more than 30 years at Posco. He has served as head of the steelmaker’s European Union Office, head of Gwangyang Works, which is Posco’s second integrated steel mill, and as chief technology officer and CEO of the steelmaker’s construction unit Posco Engineering & Construction Co.

He has spearheaded many technology development projects including the eco-friendly Finex steel production technology, which emits less carbon dioxide than the current blast furnace process. Posco began production using the process in Pohang in May 2007.

“Chung led cost-saving by Posco in recent years through continued reforms of production processes, so he is expected to show powerful leadership in overcoming this unprecedented economic decline,” a spokesman for the steelmaker said.

Another top leader at Posco is Lee Dong-hee, president and chief finance and investment officer. He too has worked for more than 30 years at the company, where he established himself as an expert in finance, heading the Finance Management Department, Auditing Department and other related departments.

Choi Jong-tae, president and chief staff officer, not only manages personnel affairs but has also taken the lead on human resources development with various education and training programs. He previously headed the Human Resources Development Center.

Hur Nam-suk, senior executive vice president, chief operating officer and chief technology officer, previously headed the Gwangyang Works, where he was the driving force behind innovations in production processes and general operations.

Chung Keel-sou, senior executive vice president in charge of stainless steel, is regarded as an expert in Posco’s overseas business. While serving as president of Zhangjiagang Pohang Stainless Steel Co., Posco’s Chinese unit, he helped it develop into a major stainless steel maker on that country’s market.

Other top managers include Oh Chang-kwan, senior executive vice president and chief marketing officer. He previously headed the Pohang Works, Posco’s first integrated steel mill.

Kwon Young-tae, senior executive vice president in charge of raw materials procurement, has worked in his field for a long time, and that expertise will come in handy as the steelmaker is expected to begin negotiations with coal and iron ore suppliers in earnest later this month.

Kim Jin-il is senior executive vice president and head of the Pohang Works. He most recently led the company’s Vietnam Project Department.

Executive Vice President Kim Sang-young is in charge of corporate communication, and is credited with Posco’s positive brand image among end consumers despite not producing any consumer goods.

Among other important executives is Cho Noi-ha, executive vice president and head of the Gwangyang Works. He has spent many years at the steel mill in South Jeolla, which focuses on the production of sheet steel used for automobiles.

Yoon Yong-won, executive vice president in charge of investment in facilities, is an expert in his field, with experience as the head of the Materials Procurement Department, Facilities Investment Planning and Procurement and other related departments.

Choo Wung-yong, now executive vice president and head of Posco’s Technical Research Laboratories, has led various research teams including the steel-welding research team and the plate research team.

The particular specialty of Chang In-hwan, executive vice president in charge of hot-rolled products marketing, is overseas marketing, as he previously headed the export development team, the automotive flat products exports team and the cold rolled products marketing department.

While the other executive vice presidents - Cho, Yoon, Choo and Chang - all majored in metal engineering and have each worked for 25 to 30 years at Posco, Park Ki-hong, executive vice president in charge of corporate strategy, has a unique background. Park earned bachelor’s and doctor’s degrees in economics and served as vice head of the Korea Institute for Industrial Economics and Trade. He joined the steelmaker in 2006 to help it set up long-term growth strategies.

Posco, the nation’s sixth biggest conglomerate excluding state-run companies, had 35 affiliates as of February, according to the Fair Trade Commission, Korea’s antitrust watchdog agency.

Some of the important leaders of these affiliates are Yoon Seok-man, chairman of Posco Engineering & Construction; Chung Dong-hwa, president of the builder; Sung Hyun-uck, president of Posco Specialty Steel Co., which produces high-quality steel for machinery, nuclear power plants and others; Park Han-yong, president of Posdata Co., a system solution unit, and Cho Soung-sik, president of Posco Power Corp., a power generation unit.

Nearly 43 percent of Posco shares were held by foreign investors as of the end of 2008. Unlike Korean jaebeol, which are controlled by the founders’ families, the influence of outside directors at Posco is seen to be strong.

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