Daewoo Chief Worries Over Labor Strife but Is Bullish on S. Korea Future

After a year of abstinence, Kim Woo Choong, the founder and chairman of the Daewoo Group, has started smoking again.

“I quit until all our labor trouble broke out,” said the 51-year-old entrepreneur who turned the tiny textile exporting firm that he co-founded with $9,000 in borrowed cash in 1967 into a $10-billion conglomerate.

In a two-hour, 45-minute interview, however, labor strife was the only problem Kim cited for his group of companies or for South Korea. Indeed, Kim’s horizons, like those of South Korea, keep broadening.

Just back from escorting the presidents of 12 Daewoo Group companies to China for the first visit to a Communist nation by the executives of an entire Korean conglomerate, Kim disclosed that Daewoo will make its first direct investment in its own name in China by setting up a casting and compressor factory with a Chinese corporation to make parts for a refrigerator factory in Fujian province.

Daewoo will put up half of the $80 million needed to build the plant and will be paid back by receiving half of the parts produced for use in building its own refrigerators in South Korea, he said.

The group already owns an equity interest in a refrigerator factory in Fujian province but made that investment through a dummy company in the United States.

Kim, who paved the road to diplomatic ties between Moammar Kadafi’s Libya and South Korea by carrying out multibillion-dollar construction projects in the North African nation, made it clear that his goal is the same with the Communist nations, none of which now maintain full diplomatic relations with Seoul. He has made numerous secret and public trips to China, the Soviet Union and East Europe.

Already, he said, the Daewoo Group alone has achieved more than $200 million worth of trade with Czechoslovakia, more than the total that the government reports for all of South Korea’s trade with East Europe and the Soviet Union combined.

Daewoo’s two-way trade with East Germany, he added, has reached $40 million.

“The government,” he said, “doesn’t get all the figures because much of the (Communist) trade goes through other countries.”

Daewoo, which already owns the Seoul Hilton, is looking forward to buying the Hilton Hotel in Budapest and building a second Hilton in the Hungarian capital, he said. Also under consideration, he said, are a joint venture general trading company and a jointly owned construction company in Hungary as a means to enter East European markets in both fields.

Projects in the Soviet Union are being considered, but Kim refused to elaborate for the record.

Kim said he is bullish on South Korea’s own future, both economically and politically.

In three years, he predicted, South Korea will enjoy its first trade surplus with Japan. By 1992, it will achieve a per-capita gross national product of $8,000, not $6,000 as President Roh Tae Woo predicted Oct. 4. It is now slightly higher than $3,000.

“Roh didn’t take into account the effects of appreciation” of the won, South Korea’s currency, Kim said. And, instead of the 8% that the government foresees for real growth in the economy next year, Kim says the GNP will continue to grow by more than 10%.

“If it hadn’t been for the labor trouble,” he said, “the GNP would have grown 20% last year,” instead of 12%.

Kim was clearly upset by the labor strife that his companies have faced. At Daewoo Shipbuilding, one labor leader was killed in 1987 when he was struck in the head by a tear-gas canister fired by riot police. The funeral triggered additional strife. Finally, Kim took over direct management of the company himself.

At Daewoo Motors, a joint venture with General Motors, strikes halted production for more than a month both last year and this year.

South Korea’s largest firms, he predicted, have faced the last of demands for big wage boosts that swept the country both last year and this year after Roh, then chairman of the ruling Democratic Justice Party, promised to transform authoritarian South Korea into a democracy.

“But workers in small companies will now start pushing for big wage increases to catch up. There will be hard negotiations,” Kim added, “for the next two or three years.

“Strikes are now going on the whole year round. Even now, there are strikes at many factories that are not reported,” he said.

At Daewoo Motors, he said, labor leaders are expected to turn the focus of their demands from wages to shorter working hours and more holidays. The union, he said, is insisting on reducing regular working hours, now fixed at 44 a week. Automobile workers are currently putting in 56 hours a week, including 12 hours of overtime.

Kim said union leaders at the shipbuilding company have agreed not to strike and to seek no more than 10% wage increases annually for the next five years. “They are working to seek agreement from the union members,” he said.

Neither the steep climb in wages--more than 30% in the last two years--nor the prospects for still more appreciation of the won disturb Kim. Overseas demand is so strong for Korean products, he said, that manufacturers have found it easy to raise prices to cover setbacks in won earnings caused by appreciation.

“We can’t meet the demand either at home or abroad” for cars, he said.

In addition, expansion of plant facilities, increasing automation and cost-saving production in South Korea of components previously imported will permit Daewoo, he said, to achieve gains in labor productivity averaging “at least 30%” in coming years.

So bullish is Kim that he has determined to set up a new automotive firm to produce mini-cars with help from Suzuki Motors of Japan, he said. He complained that GM executives, “thinking with a developed-nation mentality,” have resisted numerous Daewoo efforts to expand production in their 50-50 joint venture. With the new firm that will be set up without GM participation, Kim said he intends to show General Motors how much expansion is possible in a country such as South Korea.

Kim was equally bullish about the prospects for his country’s political stability.

Recently named head of a businessmen’s committee dedicated to improving the image of the nation’s chaebol (conglomerates), Kim acknowledged that in the public eye big business is “the second evil,” exceeded only by the wrongdoings of Roh’s authoritarian predecessor, former President Chun Doo Hwan.

Kim predicted, however, that planned reforms will help polish the reputation of big business. By 1991, the government will have all real estate holdings listed in computers and require all bank transactions to be conducted with real names, instead of fictitious names or the names of relatives. Those reforms, he said, “will reduce corruption.”

“All assets will be registered in tax offices and donations and political funds all will become open,” he said.

Kim also declared that the days of military intervention in politics have ended.

“We are now in a transition from an army government to civilian rule,” the businessmen said of Roh, who, although he is an ex-general, has pledged to carry out full democratization of South Korea. “The army has no choice” but to acquiesce, Kim said.

Kim said the United States should not worry about Seoul’s dramatic expansion of contacts with the socialist bloc.

“Our main goal is (improving relations with) China”--a target with which the United States “shares a common interest,” he said. Only by “balancing China with Japan” will the United States be able “to control Japan” in the future, he said.

Ultimately, government officials say, Seoul hopes its relationships with Communist Bloc nations will force the hostile and isolated Communist regime in North Korea to open up and become less of a military threat to South Korea itself.

Kim predicted that trade frictions with the United States would be eased by the two nations hammering out a “package settlement” to all of their disputes next spring after a new administration takes over in Washington. But he did warn that “the United States must change its attitude toward South Korea.”

Indeed, he added, the change should have started at least eight years ago.

“We used to belong to the United States,” he said. “But now we have built up our nation, and our pride has risen. The United States should stop injuring Korean pride.”

Kim cited a series of incidents, including one in which U.S. Secret Service agents brought a dog trained in detecting explosives into the office of South Korea’s foreign minister to check for security before a meeting with Secretary of State George P. Shultz in 1986. He complained that too often the United States “just informs” South Korea of decisions on which consultations should have been carried out. And he criticized the attitudes of American consular officers dealing with Koreans applying for visas to the United States.

“That visa interview isn’t an interview,” he said. “It’s an interrogation.”

The chain of snubs and incidents, he warned, is building up resentment against the United States and handing radicals ammunition to use in their anti-American campaigns.

“The United States can correct this without making any investment--just by changing its attitude toward Korea,” he said. “In Korea, face and pride are very important.”