[VIEWPOINT]Give our negotiators wiggle roomThe government is pushing ahead with corporate restructuring. President Kim seems to want to demonstrate that he is concentrating on national affairs, keeping himself away from politics, or perhaps he does not want to hand over a mess to the next administration, an admirable sentiment. Why could these steps not have been taken earlier, though?
There are also some strange things about the new vigor to restructure. In particular, the government has vowed on several occasions to dispose of Korea Life Insurance and Hynix Semiconductor speedily. That is a very dangerous way of thinking.
In sorting out troubled companies, time is a more pressing matter than financial losses. Granted, it is often far more advantageous to sell indebted firms quickly, even at a loss. That was true after the financial crisis that began in 1997, but things are different now. There is absolutely no reason to push the sale of Korea Life hurriedly and it would be appropriate to approach Micron Technology again with an offer to sell Hynix.
Korea Life is the only insurance firm that was bailed out by the government and normalized, unlike a dozen other such firms that went bankrupt. Korea Life made 300 billion won ($249 million) in profits under the bailout program, but got into trouble because of the woes of its owner.
Despite its ups and downs in the past, Korea Life has become a healthy company, posting 800 billion won in profits last year under a plan that gave a priority to its normalization before its sale. The next step is to recover the bailout funds given to the firm, or at least as much and soon as possible, by selling it to a promising owner. It is not only important to sell a controlling stake at a high price but also to maximize the capital gains of the remaining shares owned by the government. This time, the government should find an efficient and smart owner, a company that has experience in the insurance business, or at least in other financial areas, and is transparent and ethical in its management.
For those reasons, the government should examine whether it is really desirable to hand over Korea Life to the Hanwha Group. Hanwha has a history of failure in managing a merchant bank, and needed a huge bailout to come back to life. Hanwha is evidently not free from problems of loose discipline.
Hynix is a headache in another respect. The government should not repeat the foolish mistake of giving important negotiating advice to a potential foreign buyer in advance while trying to make a deal. It is perplexing to look back on what senior government officials said and how negatively this affected the Korean negotiators' bargaining power during the negotiation with Micron. It is inexplicable that a senior government official has on more than one occasion said, "There is still no other option except selling Hynix to Micron." If there were no other option, Micron would be in the driver's seat in any new negotiations.
The talks with Micron broke down, but they could restart without much difficulty because of the needs of both parties. Micron is likely to cut its offer price below the figure it suggested during the last negotiations, saying that Korean negotiators violated previous agreements and caused the talks to break down. In preparing for more negotiations, the government should be quiet in order to support Hynix's creditors across the table from Micron. Negotiating is a business, and the government should not intervene. If it does, it will ruin any deal.
Things have changed a great deal. The financial crisis is over and Korea's credit rating is significantly improved. Although there are contradictory views on Hynix's chance of survival as an independent company, the sale should not be handled as if the creditors were selling junk. The government should not drive the negotiators into a corner by setting a time limit and selecting a buyer even if President Kim ordered an early solution. Even though the government pushed the sale hard last time, Hynix's board dared to veto the agreement with Micron for that reason.
Reflecting on the negotiations, the Korean team suffered a number of indignities. They yielded to almost every demand Micron made. Since the government was in such a hurry, the negotiators had to endure the pressure. For the next negotiations, if there are any, the Korean negotiators should have more freedom of maneuver; not because of self-respect but because negotiations are business. A commitment to sell Hynix before President Kim leaves office is a powerful tool for the buyer in negotiations.
The writer is a professor of business administration at Chungbuk National University.
by Kim Ki-hong