5 S. Korean Conglomerates to Detail Reforms

Under pressure to trim back and reduce debt, the giant Samsung Group may give up its plan to build a 102-story office tower here but will continue a controversial automotive venture as well as its distribution, finance and semiconductor businesses, according to media reports Sunday and this morning.

Executives from Samsung and four other giant chaebol, or conglomerates, are expected to deliver their blueprints for restructuring their enterprises to the government this week. Hyundai is reportedly going to release its plan today.

The breakup of South Korea’s giant conglomerates is part of the reform package required by the International Monetary Fund as a condition of its $60-billion bailout of South Korea last fall.

The aggressive debt-financed expansion of the chaebol, which dominate the South Korean economy, played a key role in the country’s accumulation of $158 billion in foreign debt.

Many South Koreans criticized Samsung’s decision to enter the capital-intensive automotive sector at a time when Kia and other South Korean auto makers were struggling and there was a worldwide glut of vehicles. But that venture is a pet project of Samsung Chairman Lee Kun Hee, who has invested $1.8 billion into a new automobile manufacturing plant in Kwongsang Province.

The four other large chaebol are considering focusing their enterprises in the following manner, according to Munhwa Broadcasting Corp.:

* Hyundai: construction, automobiles, heavy industry, electronics and finance.

* LG Group: information technology and telecommunications, electronics and biotechnology.

* Daewoo: automobiles, electronics, construction and information technology and telecommunications, with particular focus on international markets.

* SK Group: energy, finance, information technology and telecommunications.

In addition to focusing their operations, the chief executives of South Korea’s five largest chaebol agreed last week to improve their accounting procedures, end the practice of cross-guarantees of loans, reduce their debts and invest their personal assets into their companies and take responsibility for management failures.

To meet those pledges, the chaebol have already announced plans to suspend proposed investments and sell off some of their businesses to raise capital to bolster their core operations. Hyundai is halting plans to build a steel plant in Ilkwan and LG Group plans to sell $1.8 billion worth of assets, according to Munhwa Broadcasting.

Kim Jin Ouk, a prominent international trade attorney, suspects the firms will begin by trading companies that don’t fit into their core markets and then put others on the market.

He said foreign investors are already looking for merger or acquisition candidates that give them a foothold or an expanded presence in the South Korean market.

A team of South Korean officials arrived in New York on Sunday to begin talks with international bankers on rolling over the country’s $25 billion to $28 billion in short-term debt that comes due in the next two months.