Leaders lay out plans to make it through difficult year

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Leaders lay out plans to make it through difficult year

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The Year of the Sheep has arrived and Korean conglomerates have rolled out their New Year messages focusing on overcoming the difficult economic environment by improving internal stability and the quality of their businesses.

In messages delivered to mark the first work day of the new year, no chairman or CEO said that this year’s business environment would improve over last year. They ordered their employees to stay alert and asked them to be innovative and come up with market-leading solutions.

Although speaking about innovation has become commonplace each year, the leaders of conglomerates looked desperate and more cautious this time, using more definitive words like “must,” “go to the basics,” and “change the rules” in their messages. They also emphasized executing plans, instead of just making them.

Not all chairmen delivered a message, as some were absent due to illness or imprisonment. But for those who are still at the helm and busy monitoring the results of year-end restructuring at their affiliates, their messages were mainly about trying to make 2015 a year of big growth.


Chairmen ask workers to execute plans

Hyundai Motor Group Chairman Chung Mong-koo ordered his employees to aim for a brighter future and proposed three major goals: sell 9 million cars, improve brand image and secure environmentally friendly and high-end technology to strengthen global competitiveness.

In the year-opening ceremony at its headquarters in Yangjae-dong, southern Seoul, on Friday, the 77-year-old Chairman thanked employees for their achievements in 2014, which he said was an “economically tough year,” then suggested ways affiliates and employees could help the company become a leading automaker.

Chung’s address this year was a bit different from in the past, as he spoke for about 15 minutes with no script.

“As you already know, next year’s goal for Hyundai Motor and Kia Motors is to sell 8.2 million cars,” Chung said. “Considering our capacity for production and sales lines in the world, achieving the goal won’t be that difficult. But what we really need to do is that we should be prepared for a 9 million [sales] era.”

Chung said that reaching the 9 million mark will mean that its market share for large-size cars will expand and the company will have to compete with other foreign brands such as Toyota, which produces more than 10 million vehicles a year. The chief of Korea’s largest automaker said he expects to reach that goal when two new Hyundai factories are completed in China in 2018.

In order to achieve the 9 million milestone, Chung said that both Hyundai and Kia need to improve their brand image, and the first step to doing that is to successfully build their new headquarters in Samseong-dong, southern Seoul.

“The reason we decided to invest 10 trillion won [$9 billion] in the new building is because it will definitely improve the company’s image and it will eventually lead us to perform better in global sales,” he said.

In September, Hyundai won a bid to purchase the headquarters and property of Korea Electric Power Corporation in Samseong-dong for 10.5 trillion won. The company plans to build a 105-story Hyundai Global Business Center by 2020.

On the other hand, LG Group Chairman Koo Bon-moo said the group should aim for quality over quantity this year. He stressed that the way to survive amid the unfavorable market conditions is to beef up efforts to create market-leading products.

At the LG Twin Tower in Yeouido, western Seoul, Koo said business conditions in 2015 will still be difficult, citing unstable foreign currencies, the low price of oil and companies copying LG’s products. But he said LG needs to find its own unique way to prepare for the future.

“In order to lead the market, there should be a thorough strategy and operating plan, as well as good employees,” he said. “But even if we prepared those, there will be no achievements if we can’t execute. So, what’s important is to take it to action.”

Shin Kyuk-ho, Lotte Group’s founder and chairman, was focused on stabilizing the group’s profitability structure and main business, instead of bulking up its size.

“In an uncertain economic environment, pursuing short-term profit or growth could be a poison to us,” he said.

Shin, the oldest chairman of all Korean chaebols at 92, also said that all businesses should be managed from the viewpoint of the customer. The founder of the nation’s fifth-largest conglomerate also ordered employees to work on its “omni-channel” shopping strategy in order to compete with global distribution companies, and ensure safety at the Lotte World Tower in southern Seoul so the group can gain the public’s trust.

“[We must] keep finding a solution to complete corporate social responsibility and grow with the local community,” he said.

GS Group Chairman Huh Chang-soo said that its affiliates should increase their competitiveness around customers and hands-on management and also create a more flexible corporate culture for better communication.

Huh, who also leads the Federation of Korean Industries, a business group for conglomerates, asked employees not to do unnecessary work, saying that “extra positive work isn’t worth it unless you get rid of the negative work.”

“We should not make the same mistake that we have in the past, but should evolve actively by continuously innovating,” he said. “We should encourage constructive criticism as our strategy and custom, while creating an atmosphere to embrace new ideas.”

Kwon Oh-joon, chairman of the nation’s leading steelmaker Posco, urged his staff to be prepared for a tough year due to oversupply in the industry.

“The year 2015 will be very tough for us because the economies of both Korea and China are predicted to grow slowly, and the weakening Japanese yen will lower our competitiveness in exports,” Kwon said in his address on Friday.

He said it will be very hard to reach a high profit margin because demand in the global steel industry won’t grow much while the average product price is predicted to fall. In order to overcome the situation, the company needs to continue restructuring by shutting down businesses that are expensive to maintain, he said.



Stay alert and find new opportunities

For conglomerates missing their leader, the year 2015 will be even more challenging.

Korea’s No. 1 conglomerate Samsung did not make a New Year’s announcement because Chairman Lee Kun-hee is hospitalized, but the CEOs of its affiliates delivered New Year’s speeches instead.

After his New Year’s remarks, Samsung Electronics CEO Kwon Oh-hyun and employees shouted the slogan, “New challenge, new start!” as the tech company prepares to deal with major competition in the industry.

“We should gain future competitiveness by pushing our smart health, smart home and Internet of Things businesses,” Kwon said.

Samsung Electronics struggled last year as its main smartphone business was squeezed by Chinese manufacturers and Apple’s new iPhone.

Kwon said the company should work to create demand to maintain steady growth in the business-to-business sector, while reinforcing its place as a leader in devices.

SK Group, whose Chairman Chey Tae-won is currently in jail for breach of trust, announced its New Year’s message through Kim Chang-geun, chief of the SUPEX Promotion Council, the branch that manages the nation’s third-largest conglomerate.

He said that the group is expected to face “unprecedented troubles with management” due to rising business uncertainties as Chey remains absent.

“Energy and chemical, which account for more than half of the group’s revenue, is under pressure to survive due to major changes like the shale gas and crude oil price drop,” Kim said. “The absence of Chey, who has made ties with global leaders for our group’s growth, is lengthening, which is delaying our efforts to find new growth engines.”

For the company to survive, Kim ordered affiliates to be more competitive by changing the rules of the game and improving the quality of business.

CJ Group, a food and entertainment conglomerate, is also worried about the absence of its chairman, Lee Jay-hyun, who was charged with breach of trust and embezzlement. Lee’s imprisonment has been suspended due to his deteriorating health, and his cousin Sohn Kyung-shik is interim chairman.

“This is going to be the year that employees should take a more active role than any other time,” Sohn said. “Since we have a varied business portfolio, let’s contribute to the creative economy.”

Sohn then unexpectedly added a messages from Lee. Lee asked that employees help achieve the goal of making a “great CJ,” with annual earnings of 100 trillion won and operating profit of more than 10 trillion won by 2020 while he regained his health.



Time to leap forward

Chaebol that have suffered in recent years announced that 2015 is the perfect time to start over.

Hanwha Group Chairman Kim Seung-youn, who is back in charge after he was released from jail in February, said that the group is at a turning point. It was first time that Kim was able to give the New Year’s message to employees since 2012.

“Everything is now falling into place,” Kim said. “Hanwha’s clock is ticking again and our heart is pounding with new hope.”

The chairman said he had high hopes after acquiring defense and chemical companies from Samsung. In November, Hanwha announced that it would buy four companies from Samsung for 1.9 trillion won.

“It [the acquisition] will be another historical challenge that will decide the group’s fate,” he said. “By focusing on businesses that we know are good, we should innovate our abilities to a global level.”

Kumho Asiana Group Chairman Park Sam-koo provided his employees with specific numbers for encouragement, saying that the group should collect revenue of 12 trillion won and operating profit of 732 billion won in 2015. The group has not reached annual sales of 12 trillion won since 2010.

In 2014, the group announced a new motto: “The second founding.” Park said that motto had been achieved after the group’s affiliates finished their debt workout program last year and that the group should proceed under the new motto, “Strengthen self without stopping.”

“Let’s show group’s power again that overcome Asian financial crisis and reached nation’s seventh largest conglomerate,” he said.



Mobile carriers talk innovation

Korea’s three mobile carriers - SK Telecom, KT and LG U+ - suggested that innovation will be the key to their success in 2015.

KT, which carried out major restructuring last year after Chairman Hwang Chang-gyu took charge, encouraged employees to get work done in a “smart” way.

“Due to the Mobile Device Distribution Improvement Act, it is quite difficult to predict the communications market for 2015,” Hwang said. “To gain trust and dominate new business areas, our performance in the first half of the year will be the most important.”

“In order to secure long-term competitiveness, we need to upgrade to the next level through radical reforms rather than just working hard,” the CEO said. “All the work should be checked with respect to customers.”

SK Telecom CEO Jang Dong-hyun, who was inaugurated in the top position on Dec. 9, announced the company’s improvement plan, which includes partnering with competitive players outside the telecoms industry.

“We are not yet sure about future growth amid the fierce competition beyond borders and across different industries,” Jang said.

“In order to overcome this, we need to look back on our business models thoroughly and solidify the existing strengths.”

LG U+ CEO Lee Sang-chul projected that 2015 will bring a new generation of ICT, in which customers will create value.

“This year, pioneering spirit … is needed more than ever before. With a creative sprit, we can lead the change in the world,” Lee said.

BY JOO KYUNG-DON, KWON SANG-SOO AND KIM JUNG-YOON [kjoo@joongang.co.kr]

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