First Online Meeting After Reappointment on the 28th
"I am an Industrial Policy Expert... Will Focus on Scale-up"
"Reappointment Feels Heavy... Immediate Task is Overcoming the COVID Crisis"
"Jeju Air Considering Support from Ki-An Fund... Eastar Air Not Eligible"
"Asiana Airlines, Currently Difficult to Sell Entirely or Separately"
"Daewoo Shipbuilding & Marine Engineering Merger to be Completed by First Half of Next Year"
[Asia Economy Reporter Kangwook Cho] Lee Dong-geol, Chairman of the Korea Development Bank, said on the 28th, "I am someone who argues that we need to return to the industrial policies of the 1960s and 70s," adding, "Going forward, we will focus on scaling up innovative companies to overcome COVID-19 and its aftereffects."
Chairman Lee made these remarks while explaining his management policy for the second term during an online press conference held for the first time since his reappointment.
Regarding his reappointment, he said, "I feel a heavy sense of responsibility," and added, "The immediate task is to overcome the COVID-19 crisis."
He stated that he will focus on three main pillars: ▲innovative growth, ▲restructuring, and ▲organizational change and innovation.
First, concerning innovative growth, he plans to concentrate not only on discovering and nurturing new industries but also on transforming outdated parts of traditional industries into advanced industries.
Chairman Lee explained, "Discovering new companies related to cultural content, bio, and the Green New Deal is an unavoidable task in overcoming the COVID-19 crisis."
Focus on Discovering New Growth Engines... Expanding the Logistics Industry Among Traditional Industries
He particularly pointed to the logistics sector as an outdated industry among traditional industries.
He said, "Although Korea is known as a delivery paradise, the logistics industry is very backward in terms of financial power and technology, and its development is slow compared to its investment value domestically," adding, "Especially since logistics is included in the Korean New Deal, the Ministry of Land, Infrastructure and Transport and the Financial Services Commission are interested, so we will focus on growing the logistics industry in cooperation with government agencies."
Regarding restructuring of insolvent companies, Chairman Lee said that completing major pending issues well is a key task.
He also expressed reflections on the overall problems related to restructuring, emphasizing that outdated customs need to be improved as much as the immediate restructuring challenges.
Chairman Lee said, "Unnecessary labor-management conflicts not only become serious obstacles in the process of normalizing companies but also create sources of conflict," and stressed, "We must uphold three principles: responsible roles of major shareholders, pain-sharing by stakeholders, and sustainable management normalization plans."
He particularly criticized some company unions for not implementing agreements made with management when preparing self-help contracts. For example, despite agreeing to discuss wage increases only if the company makes a profit, some unions have insisted on raises and gone on strike even while the company continues to operate at a loss, or have failed to honor agreed unpaid leave periods.
Multi-year Wage and Labor Agreements... Need to Reconsider Seniority System
Chairman Lee argued that wage and labor agreements should be extended to multiple years rather than being annual, citing inefficiency in establishing mid- to long-term plans with one-year agreements. He explained that in the U.S., most agreements last four years.
He also said that the seniority-based wage system needs to be reconsidered. In some restructured companies, there are employees who receive large salaries based on seniority, which causes difficulties in restructuring due to intergenerational conflicts.
Chairman Lee emphasized, "The sacrifices arising from restructuring should not be borne solely by individuals; a social safety net must be established so that society as a whole can share the pain," adding, "Only then can production and office workers of insolvent companies overcome difficulties more easily."
Enhancing Asiana Airlines' Corporate Value is Urgent Priority: "Not the Time to Discuss Sale"
Regarding the restructuring of Asiana Airlines, he said, "Raising corporate value is the urgent priority now."
On the sale of Asiana Airlines, Chairman Lee said, "Currently, both full sale and split sale are difficult," and added, "We will soon conduct external consulting and review various options before considering a sale in the future."
He expressed regret over the collapse of the deal with HDC Hyundai Development Company.
He explained, "We judged that Hyundai Development Company had no intention to acquire, and in such a situation, we decided to proceed with stabilization efforts rather than leaving Asiana Airlines in limbo," adding, "Although it is very regrettable that the deal with Hyundai Development Company fell through, we decided to prevent further damage to corporate value amid ongoing uncertainty."
Chairman Lee said, "In the case of Asiana Airlines, forcing cost burdens and pain-sharing could damage long-term value, so we will first seek an appropriate balance of pain-sharing," and added, "When conditions improve, we will proceed with either a full sale or split sale."
He also mentioned that he will soon meet with the Asiana Airlines union for frank discussions.
Chairman Lee emphasized, "We will meet directly with labor, management, and creditors to discuss how to unite and make Asiana Airlines a sound company."
Jeju Air's Fund Support to be Reviewed Upon Application... Eastar Jet Does Not Meet Requirements
He hinted at the possibility of injecting the Industrial Stabilization Fund into some low-cost carriers (LCCs) such as Jeju Air.
Chairman Lee said, "Since each LCC's situation is different, support through policy finance is desirable," and added, "Jeju Air and Air Busan meet the requirements for Industrial Stabilization Fund support."
However, since Air Busan is a subsidiary of Asiana Airlines and linked to Asiana's restructuring plan, it will be reviewed again later.
He said that Jeju Air's support will be considered if it applies for fund assistance.
Regarding Eastar Jet, he gave a firm negative response.
Chairman Lee said, "Eastar Jet has been in a state of complete capital erosion even before COVID-19, making direct support difficult," and added, "It is judged that Eastar Jet does not meet the requirements for Industrial Stabilization Fund support."
Daewoo Shipbuilding & Marine Engineering Merger to be Completed in First Half of Next Year
The merger between Hyundai Heavy Industries and Daewoo Shipbuilding & Marine Engineering (DSME) will be completed by the first half of next year.
Chairman Lee said, "Regarding the DSME merger, corporate merger approvals are currently underway in four countries."
The corporate merger review between Korea Shipbuilding & Offshore Engineering, the intermediate holding company for shipbuilding under Hyundai Heavy Industries Group, and DSME is currently ongoing with the Korea Fair Trade Commission, the EU, Japan, and China. If any one of these countries opposes, the merger will be canceled.
Previously, the EU Commission postponed the corporate merger review three times this year due to difficulties in data collection caused by COVID-19.
Chairman Lee said, "The EU is key, and we received a response that the review will be completed by the end of this year," adding, "We expect the deal to be finalized in the first half of next year."
Support for Ssangyong Motor Depends on Business Sustainability
Regarding support for Ssangyong Motor, which is facing management difficulties, he said that business sustainability will be an important consideration.
Chairman Lee said, "I have heard that HAAH Automotive Holdings proposed to acquire Ssangyong Motor, but I am not involved in the details," adding, "I have only been informed that Mahindra and potential investors are conducting close negotiations."
He continued, "Since the Korea Development Bank is not a negotiating party, we receive indirect reports and cannot confirm specifics," but emphasized, "The essential issue for Ssangyong Motor is business sustainability, that is, business viability."
Chairman Lee acknowledged, "I am aware that doubts have been raised about Ssangyong Motor's sustainability," and stressed, "We will naturally regard that as very important."
New Deal Fund Sub-fund Managers to be Selected in First Quarter of Next Year
To establish the Korean New Deal Fund, sub-fund managers will be selected by the first quarter of next year.
Chairman Lee said, "We have formed a New Deal Fund task force to steadily discuss investment asset criteria, industry selection, and sub-fund design," adding, "Detailed sub-fund matters will be finalized in November, and through a public offering in December, we plan to select sub-fund managers by the first quarter of next year and proceed quickly."
Until just before his term expired on the 10th, there were criticisms calling his reappointment a 'blind appointment.'
In response, Chairman Lee said, "I do not think there is a need to improve the appointment method. It is a policy decision by the appointing authority and a matter to be judged based on performance."
He added, "I received praise for being reappointed for the first time in 26 years, but I do not consider it something to welcome," and said, "Since I was appointed blindly, I will accept it graciously even if I am dismissed blindly at any time."
"I Was Not Thoughtful... Maintaining Political Neutrality"
Along with this, Chairman Lee apologized once again for his toast remark of "20 years of ruling" at the recent book launch event of Lee Hae-chan, former leader of the Democratic Party of Korea.
He said, "I apologize again for my thoughtless remarks," and stated, "Although there is no special legal provision regarding political neutrality, I have maintained political neutrality more than anyone else while executing policy finance, and I will continue to execute policy finance based on fair principles."
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