Daewoo: Exile Of The Patriarch
Armed with just $10,000, Kim Woo-Choong started the Daewoo group in the late 1960s by making cheap shirts for U.S. mass marketers. Partly thanks to his connections with South Korean governments, he was able to build Daewoo into a $57 billion industrial powerhouse, making autos, ships, electronics, and a wide array of other goods. The chain-smoking, silver-haired tycoon became a roving ambassador, circling the world in search of the next deal.
Now, the 59-year-old Kim is headed into exile. Officially, Daewoo says the boss's decision to base himself in Vienna is not connected with his current trial on two charges of paying bribes to former President Roh Tae Woo, who is at the center of a $650 million corruption scandal. In court, Kim has repeatedly said his payments to Roh were political contributions, not bribes. If Kim is convicted, he is expected to be fined or win a suspended sentence instead of facing jail time.
DARING PLAN. Despite company denials, the conclusion appears inescapable that Kim's plans to depart after his trial reflect his feeling that the investigation into past links between Korea's chaebol and its military-backed governments has been overtly political. Kim was not available for comment, but one source says going on trial is "sickening" to him.
As his replacement, Kim has appointed Yoon Young-Suk, previously chairman of Daewoo's heavy-industry unit, to run the whole group, with the exception of autos. Kim will now concentrate full-time on that business. "It is not really true that Chairman Kim is leaving Daewoo," says Yoon. "He wants a break to concentrate on overseas automotive ventures." Yoon, 57, is a trusted ally who graduated from the same high school Kim did.
Kim's decision has shocked some employees, who worry about a potential managerial vacuum. But few Daewoo watchers believe the group will begin to drift. For starters, Kim's full-time presence in Europe will turn up the heat on competing auto makers. Kim, who spent nearly 250 days in Europe last year, wants to knit together his daring auto investments of nearly $3 billion (table).
Kim is convinced these low-cost manufacturing bases will allow him to dramatically undercut such rivals as General Motors, Ford, Volkswagen, and others in Western Europe. Daewoo is committed to investing an additional $2 billion in the next five years to improve those plants. Daewoo Motor's ultimate goal is to break into the ranks of the world's top 10 auto makers by making 2 million cars a year by 2000.
RETRIBUTION. Kim has an old score to settle with General Motors Corp. in particular. GM and Daewoo entered an alliance in the late 1980s, with the American giant buying 50% of Daewoo Motor. The venture fell apart in 1991 amid acrimony, and Daewoo was barred from the U.S. until 1996. That left Kim with little alternative but to focus on developing markets. Now it could be payback time, with GM's position in Europe a key target. "He wants to prove to GM that his strategy of concentrating in Third World markets does work," says one source close to Kim.
Back home, Kim's departure could help rejuvenate the ranks of his group's management. When Daewoo announced its annual round of promotions in early January, nearly 100 younger managers were appointed to senior posts. Some of the newly appointed CEOs of Daewoo's companies are in their 40s, a bold move in Korea's highly seniority-based system. If Kim were still in place in Seoul, his dominating personality might discourage the younger managers from making more of their own decisions.
These managers are now expected to hammer away at the group's "global management" strategy with even greater vigor than before. That strategy calls for Daewoo to build hundreds of wholly owned subsidiaries and joint ventures in the emerging markets of Asia, Europe, and Latin America and realize total sales of $200 billion by 2000. Although that target may be unrealistically high, there's little question that Daewoo is going to continue to grow rapidly.
So although Kim will be in selfimposed exile, his move doesn't appear to reflect a blunting of Daewoo's global push. Company sources say Kim isn't likely to slow down appreciably. For three decades, he has never taken a single day off. "He won't be enjoying opera in Vienna, but watching operations," says Yoon. Most likely, the world hasn't heard the last from Chairman Kim.