NEWS ANALYSIS
SEOUL — When a top executive departs Hyundai or Kia in the United States, people grumble about how Koreans distrust outsiders. Having worked in Korea during the past five years, I have heard the same grumbling. It’s often true.
Koreans are famously wary of outsiders. Every year, crowds take to the streets of Seoul to protest something foreign. This year’s target was American beef imports.
At Hyundai Motor America, top executives Bob Cosmai and Steve Wilhite were pushed out in the past few years. At Kia Motors America, Peter Butterfield was ousted in 2005, and Len Hunt departed in February.
Nevertheless, the notion that Hyundai discriminates only against foreign executives is off -base. In fact, Hyundai axes Korean executives frequently, too.
Even the son of Hyundai Motor Co.’s chairman isn’t safe. Chung Eui-sun lost his job as Kia CEO in March, although he now is president in charge of overseas sales. At Hyundai, executive turnover says more about Korea’s corporate culture than it does about Americans.
To prove my hunch, I pored over recent annual reports of Hyundai and Kia. Sure enough, it turns out that Hyundai is an equal-opportunity pink-slipper.
From the beginning of 2004 until the end of 2007, 41 names left the rolls of Hyundai Motor Co.’s top five levels of executives at the company’s domestic operations. In the first half of this year, 12 more names left out of a total of 61. For Kia Motors Corp. during the same period in Korea, 41 top executives left. All of the departed executives at both Kia and Hyundai were Korean.
The reason for this shuffling is the chairmen-dominated system of large Korean companies, called chaebol.
‘We call them slaves’
“Executives are sometimes compared to a candle by the window. The wind blows them out,” says Kim Tae-nyen, a director at the Korea Automobile Manufacturers Association.
Korean chairmen rule their companies as kings. CEOs, presidents and vice presidents are their subjects.
“We call them slaves,” says Chung Sun-sup, who heads a research organization on Korean conglomerates called Chaebul.com.
At my job working for the news department of a Korean TV channel, things are casual compared with the upper echelons of a chaebol. But even here, if a company big shot walks into the room, everyone stands up, smiles, bows and offers a polite greeting.
When you drink with the boss at one of the frequent office parties, there’s a ritual worthy of an anthropology class. Honor is bestowed on a worker, especially a younger one, to whom the boss offers a drink.
With obsequious body language showing humble thanks, the worker gets up and sits next to the boss, who pours a shot into his own glass and hands it to the worker. The worker drinks and does the same for the boss. Meanwhile, everyone is watching, smiling and encouraging.
Comfortable with strongmen
Western reporters typically explain all things Korean with one word: Confucianism. Respect for order and authority creates extreme deference to corporate superiors. But that’s too easy. The chaebols’ power also stems from the ruinous economic conditions after the Korean War.
The first two generations of chaebol leadership thrived under the dictatorships that followed. The era lasted until 1987 and was marked by a strong partnership of government and business.
Some of the recent shuffle at Hyundai followed a shift in power, says Chaebul.com’s Chung. Chung Mong-koo replaced his uncle Chung Se-yung as chairman in 1998. Then Chung Mong-koo started bringing in people from what is now parts supplier Hyundai Mobis, which he previously headed, and rooted out those associated with the previous chairman, researcher Chung says.
Indeed, the annual reports show that of the 27 executives working in the top five layers of Hyundai at the end of 2000, just three, including the chairman, were among the 61 still working at the end of the first half of 2008.
Kim Ki-chan, dean of the Graduate School of Business Administration at the Catholic University of Korea, says Hyundai is paying a price for its strong-boss culture. The automaker is still “not making cars to sell but making them and then having to sell what’s been produced.”
Impatient
Hyundai is shifting from its production-based strategy to a marketing one. But it still must move toward a horizontal management style that empowers managers to make decisions, Kim says. He also says Hyundai’s management is poor at coordinating different departments, and “this leads to a lot of stress.”
A Hyundai spokesman dismisses that assertion and attributes the management shuffle to the need to rotate experienced managers among the 42 companies in its empire. “Some departures are explainable by the need to rotate people to different parts of the company,” says spokesman Oles Gadacz. “That’s not always apparent to people outside the country.”
But moving from the flagship company to a small subsidiary is not considered positive in any society, much less one that values rank and image as much as this one. And once gone, names rarely reappear on the flagship company’s list.
Gadacz also says Hyundai is striving to reach the top rung of global automakers. Being fast, aggressive and unapologetic is how a young company moves up. And a company with a strong hierarchy can move quickly.
For instance, when the former DaimlerChrysler AG invited Hyundai to help develop a 2.4-liter engine with Mitsubishi, Hyundai produced drawings in just two months. Gadacz says Chrysler was impressed, saying its engineers would have taken 18 months.
Another example: Hyundai was able to build its Alabama plant in 18 months and its first China plant in six.
“We have our detractors,” Gadacz says, “but we get things done. If bodies are left by the wayside, hey, I’m sorry. There’s a bigger goal here.”
Automotive News Europe, Sept. 29, 2008
This story appeared in Automotive News under the headline Korea’s revolving door: Hyundai brooms many of its Korean executives — not just Americans