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Hyundai Endures as Worldwide Brand

10 Years After Founder Chung’s Death
Thursday, March 24th, 2011
Chung Ju-yung

The Korean economic miracle said as much about Korea’s rise from the devastation of the Korean War as it did about rising pressure for democratic reform.

In Seoul for USA Today, writing about the 1988 Olympics, I had another mission in mind, that of a book about Korea’s leading business empire, one of the “engines” of the miracle. The result was Korean Dynasty: Hyundai and Chung Ju Yung, published in 1994 by M..E. Sharpe in New York and Asia2000 in Hong Kong.

The story of Chung Ju-yung, however, went far beyond Hyundai. Chung clung passionately to the dream of Korean reunification as he divided his empire among his sons before his death ten years ago at the age of 85, on March 21, 2001, placing fifth son Mong-hun in charge of Hyundai Asan, responsible for North Korean projects, including Mount Kumkang and the Kaesong industrial complex next to Panmunjom. Mong-ku, the second son but eldest since the death of his older brother years before in Germany, would take over Hyundai Motor, and sixth son Mong-joon would remain the principal owner of Hyundai Heavy Industries, by then the world’s largest shipbuilder. Each of the other sons would own controlling shares in other enterprises. “More than any other Korean, Mr. Chung exemplified the ‘miracle’ of a country that grew from the devastation of the Korean War to become an economic powerhouse,” I wrote in a lengthy obituary published in The New York Times the day after he died. “In his final years.” I added, “he pursued another dream, that of reuniting North and South Korea through trade, aid and investment.”

My perspective on Chung Ju-yung goes back to my earliest research on Hyundai after the ’88 Olympics when he gave me a one-hour interview at his spacious office in the headquarters of the Hyundai empire next to the Secret Garden in central Seoul. I also met assorted company presidents, directors and young bureaucrats in Seoul and the industrial center of Ulsan for interviews arranged by the group’s public relations director, Park Il-kwon. The real Hyundai story, however, was difficult to fathom. If I were to write anything, I had to interview not only executives and workers in Hyundai factories, notably Hyundai Heavy Industries and Hyundai Motors, but also American managers at Hyundai Motor America and Hyundai Electronics, now Hynix, both beginning to penetrate the vast North American market. I interviewed Chung Ju-yung again in 1992 when he was campaigning for president of Korea. The interview, which took place in the campaign headquarters in Seoul, was interpreted by the president of one of his companies whom I had met at Hyundai Electronics America in Silicon Valley. Dressed in a dark blue suit, white shirt and dark blue tie with large white polka dots, Chung displayed his common sense and business acumen, offering solutions to just about everything. “One of our primary goals is to let big enterprises advance into overseas countries by specializing in areas which they can do very well,” he said. “For domestic markets, I would like to encourage small and medium enterprise.” Asked about the motor vehicle industry, he responded, “For Korean companies to compete with global companies, he said, “large size is necessary.”

In the excitement of the campaign, Chung Mong-joon, who had done graduate work at MIT and Johns Hopkins, from which he would receive his doctorate, and two or three assistants opened up to me as they never had before. Chung Ju-yung’s closest top aide, Lee Byung-kyu, let me know where and when to find his boss breakfasting daily at his formal residence in Seoul with his sons. I glimpsed them all seated around a small table eating white water kimchi and fruit before I descended to the kitchen with the wives. About 30 minutes later, father and sons emerged on the lawn to begin the long walk down the slope to Hyundai headquarters in Kye-dong.

The morning ritual had been going on for 30 years – ever since Chung had opened his first downtown headquarters for the industrial empire that had begun in a sidestreet garage and now sent ships and chips, cars and computers, oil rigs and bridges all around the world. Up at 3 a.m., Chung pored over papers, made calls and received visitors for two hours before breakfast. He had fixed his daily routine while amassing a personal fortune in the billions of dollars. Clearly he believed, after all that success, that he could do a much better job of governing the country as an “economic president” than could either of his major rivals, Kim Young-sam or Kim Dae-jung.

The 1992 election would be the second since the promulgation of Korea’s ‘democracy constitution’ in June 1987, and the first in which a civilian would become president since Park Chung-hee seized power in 1961. Kim Young-sam and Kim Dae-jung had battled Chun Doo-hwan, the general who took over after Park’s assassination in October 1979, while Chung had cooperated with Park on industrial projects. “YS” and “DJ,” as they were widely known, had lost the first election under the new constitution in December 1987 to Roh Tae-woo, Chun’s Korea Military Academy classmate, whose troops at Chun’s bidding had suppressed the Kwangju revolt in May 1980. After such turmoil, Chung was convinced his economic record would persuade voters to elect him over foes whom he saw as knowing as little about economic issues as did Chun or Roh. Kim Young-sam’s victory by a wide margin, disappointing though it was to Chung, hardly tarnished Chung’s image as a nationbuilder. By that time he had earned a place in modern Asian history that transcended political rivalries and power struggles. The views of Chung, who had assumed the title of “honorary chairman” of the Hyundai group after putting on a show of retiring to go into politics, “sprung from the Korean spirit, the Hyundai spirit, that of a family that reflected the drive of the country,” I wrote in Korean Dynasty. “The most important lesson is very strong leadership,” Chung’s fourth brother, Chung Se-yung, who ran Hyundai Motors and was group chairman when Ju-yung was running for president, told me over lunch in the Metropolitan Club of the Lotte Hotel in Seoul. “That applies to any business in the world.”

No business leader lived up to that lesson more totally than did Chung Ju-yung, as his reach extended from ownership of ‘the mother company,’ Hyundai Engineering and Construction, founded in 1947, to manufacturing, finance and trading. Chung’s plunge into the motor vehicles industry ushered in a new era at Hyundai as well as Korean history. Chung in 1967 set up a separate car office and, with bank credit and the firm support of President Park, masterminding Korea’s ‘industrial revolution,’ bought land on the Taewha River in Ulsan for his future industrial complex. After Chung registered Hyundai Motor as the first major Hyundai entity to separate from Hyundai Construction, he called on brother Se-yung to run it. A former Ford Motor executive, William Hartigan, described to me the brothers’ “Confucian ethic”: “They got the job done without screwing off,” as I quoted him as saying. Ju-yung especially, he added, was “a great patriot” who saw Hyundai’s rise “for the nation.” Chung Se-yung agreed. “There’s no secret miracle,” he said in one of our conversations. “We make good planning. We work hard.”

Chung Ju-yung's family

Supremely confident, Chung Ju-yung in 1970 bought land down the road in Ulsan for his shipyard, which, like Hyundai Motor, was initially an offshoot of Hyundai Construction. How he got a badly needed loan for this venture forms part of the Hyundai legend. Needing a recommendation from a British executive, he pulled out a 500-won note, then in common use, bearing the image of an iron-clad turtle ship that Admiral Yi had commanded against the Japanese in the 16th century. Blaming Korea’s late industrialization on the policies of the former Chosun dynasty that finally succumbed totally to Japan in 1910, Chung promised, “Once we get started, our enormous potential ability will emerge.” On the basis of that claim and Chung’s unremitting drive, Barclay’s Bank in London provided the loan for a consortium that drummed up the funds needed to build the first ships, 259,000-ton crude carriers.

By holding down labor costs and underselling competition, Hyundai Heavy Industries came to lead the world in ship-building. In response to a downturn in the market in the 1970s, HHI also got into producing platforms and “jackets,” the frameworks for off-shore oil rigs. Chung Mong-joon, named HHI president in 1982, credited Park with “giving most importantly political and moral encouragement.” The Blue House helped combat cyclical volatility in a national shipbuilding plan under which the government by 1983, the year Mong-joon became chairman, purchased nearly 26 percent of all ships made in Korea. HHI in 1992 reported a record profit for 1971 of $271.94 million, four times that of Korea’s second largest shipbuilder, Daewoo, eight times thirdranking Samsung – and enough to make it the country’ highest tax payer with a corporate tax bill of $61.2 million.

Chung Mong-joon saw bursts of activity as part of the cycle. “The world shipbuilding industry was coming out of a long recession,” he told me. ”The slump has lasted for ten years. It is not because of government policy that HHI has hit new highs. It is simply economic realities.” Although he had to give up the HHI chairmanship to aid his father’s political ambitions, Mong-joon, as principal owner of HHI, invited me for lunch with 20 HHI executives in May 1992 in the midst of the campaign. ”I’m still in charge,” he said afterwards. HHI by now was rolling in record profits. The company for which his father had desperately sought loans two decades earlier had become Korea’s most prosperous enterprise.

Chung Ju-yung, in the aftermath of the 1992 election campaign, again made a public show of fading away from business. In May 1994 he announced at a press conference that he was “retiring,” this time forever. True, he would stay on as “honorary chairman,” but from now on he would spend half his time traveling and most of the rest on his farm on the west coast at Seosan. He would, he said, devote his energies to “exporting Korean rice” – the highest quality kind that he was growing at Seosan. “Politics,” he said, “should be left to the politicians.”

Korean newspapers reported that government-Hyundai relations had “normalized” since the 1992 campaign and its aftermath. Chung’s remarks, said the Wall Street Journal, “sent stock prices among the group’s listed affiliates skyward.” Chung, recovering from the disillusionment of the election and ensuing legal entanglements, could essay the role of elder statesman and wise man as he sought both to perpetuate his legacy through his sons and to foster ties with the North.

Four years after completing the book project, on June 16, 1998, I was at Panmunjom, the “truce village” north of Seoul where the Korean War armistice was signed in July 1953, as Chung, three of his brothers and two of the sons, Mong-ku and Monghun, crossed the border into North Korea in limousines behind 100 truckloads carrying ten cows each. Chung on the same trip to North Korea revisited his native village of Asan, near the east coast north of the port of Wonsan, from which he had fled as a youth after stealing one of his father’s cows for cash to finance his trek to Seoul. It was a sentimental journey with the brothers and sons who had crossed the border with him at Panmunjom.

The donation of the cows, and the trucks to carry them, was the precursor of a project for reopening the Mount Kumkang region, above the line on the eastern side of the peninsula. At a ceremony on November 14, 1998, at the east coast port of Donghae, Chung again displayed his yearning for North-South ties by inaugurating tourist cruises from Donghae to a small port, built by Hyundai Construction, at the base of Mount Kumkang. Chung Se-yung, told me before boarding the ship for that initial cruise that the venture should “lay the foundation of reunification.”

As a major actor in the drama of the rise of the Northeast Asian economy, Chung Ju-yung, more than any other individual, had turned South Korea into an industrial nation. By now Hyundai had built ports, highways, hospitals and other facilities around the world, notably in the Middle East, was exporting everywhere, and had its own factories overseas. Chung looked not only to North Korea but across Siberia to Moscow and eastern Europe. Several months after the 1992 election, he spoke of his dream of a natural gas pipeline from Russia to South Korea – via North Korea. It was all in the vi sion of the man who had come down from the North and made his first millions on contracts with a military establishment at war only 40 years before.

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