Saturday, July 25, 2009

Daewoo: General Motor's Korea Problem

The automaker's Korean subsidiary, GM Daewoo, is losing money and facing a liquidity crisis. But it's too important to GM's future to jettison
By Moon Ihlwan

Seoul - Even as Asia remains a bright spot for General Motors (GM), its Korean subsidiary looks more like the hapless parent company than GM's fast-growing Chinese operations. GM Daewoo Auto & Technology lost $702 million in 2008, and this year its sales are off by nearly half, to 261,000 vehicles in the first six months. Now the Korean unit says it's on the cusp of a critical liquidity crunch. "Things look ugly at GM Daewoo," says Stephen Ahn, head of research at brokerage LIG Investment & Securities in Seoul.

GM Daewoo's woes stem largely from its close ties to the rest of the global auto giant. The unit made about 900,000 cars and shipped kits for an additional 1 million vehicles for assembly at factories in other countries last year, accounting for about a quarter of all GM auto sales worldwide. But some 90% of those cars are branded as Chevrolets, Buicks, and other GM nameplates that have seen sales plummet.

Given the losses, why doesn't Detroit just jettison GM Daewoo? It's too important to GM's future. The unit is a key developer of small cars for GM's global lineup; it's a vital source for engineering and parts for the China operation; and it makes a new Chevy compact due to face off with the Toyota (TMC) Corolla and the Honda (HMC) Civic. "GM Daewoo will play a more important role in the New GM's global business strategy," says Michael A. Grimaldi, president of the Korean operation.

That has left GM Daewoo scrambling to strengthen its finances. In December it had total debts of $6.8 billion. Since February, when it exhausted $2 billion in credit lines, the carmaker has sought new loans from the Korea Development Bank. The government-run lender arranged GM's takeover of bankrupt Daewoo Motor in 2002 and still holds a 28% stake. In May the KDB let GM Daewoo defer $500 million in payments. Before handing over more cash, the bank wants GM to commit to maintaining a big presence in Korea. The two sides are negotiating conditions for fresh loans, but both say they have yet to reach any resolution.

FADING ADVANTAGE
Seoul wants a guarantee because it's worried about Korea's position in the auto world. The country now offers a good compromise between high-cost, high-quality Japan and low-cost China, whose automakers have a reputation for building shoddy vehicles. But that advantage "could end in just a few years as China catches up," frets Lee Hang Koo, an analyst at the Korea Institute for Industrial Economics & Trade, a government-funded think tank.

The KDB is also seeking collateral such as more shares in GM Daewoo—something GM had resisted but is now considering. Another debt-stricken Korean carmaker, Ssangyong Motor (controlled by China's Shanghai Automotive Industry Corp.), sought receivership in February after the KDB refused to shore it up. Bailing out GM Daewoo and getting nothing in return could raise cries of unequal treatment.

Still, given the importance of GM Daewoo to both GM and the Korean economy, some kind of deal is likely. GM needs the Koreans' design chops, and Seoul doesn't want to lose the tens of thousands of jobs provided by the company and its hundreds of suppliers. "Something will be worked out eventually," says Suh Sung Moon, auto analyst at brokerage Korea Investment & Securities in Seoul. "Neither the U.S. nor Korea can afford to let it go."

http://www.businessweek.com/magazine/content/09_30/b4140029463496.htm
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Friday, July 24, 2009

South Korea's economy surges to highest growth in 5 1/2 years in second quarter

Government pump-priming and easy credit jolted South Korea's economy to its fastest growth in nearly six years in the second quarter, adding to evidence Asia is rebounding from the global slump.

The region's fourth-largest economy expanded 2.3 percent in the three months ended June 30, the Bank of Korea said Friday, as record low interest rates and government stimulus spending insulated it from the global downturn. Exports also contributed to the growth, which was the fastest in 5½ years.

South Korea joins Singapore and China among the Asian nations that have released stronger growth figures in recent weeks. Adding to the case for economic revival, the Asian Development Bank this week said East Asia could experience a "V'' shaped recovery in the next year.

David Cohen, director of Asian forecasting for Action Economics in Singapore, said "things are turning around."

Japan, the world's second-largest economy, is expected to report its first growth in five quarters next month, he said, though it remains unclear how strong the region's recovery will be.

Kang Chang-ku, an economist at the South Korean central bank, said the last time GDP grew more was in the fourth quarter of 2003 when it expanded 2.6 percent. The second quarter figures are preliminary and may be revised.

The expansion marked the second straight quarter of growth for Asia's fourth-largest economy after a contraction in the last quarter of 2008. It eked out a 0.1 percent gain in the first quarter after a contraction of 5.1 percent in the previous quarter.

China's economy, the world's third largest, grew 7.9 percent in the second quarter from a year earlier, accelerating from an expansion of 6.1 percent in the first. Singapore, meanwhile, grew for the first time in a year, its economy surging an annualized 20 percent in the second quarter.

Kwon Goohoon, economist at Goldman Sachs in Seoul, said South Korea's second-quarter figure equates to annualized growth of 9.5 percent. The Bank of Korea does not provide an annualized number.

Kwon said in a note that growth was "driven by a good mix of strong fiscal stimulus, a weak KRW (Korean won) and monetary easing."

He expressed doubt, however, that such a strong performance would be repeated the rest of the year as fiscal stimulus wanes and credit expansion slows.

In response to the global financial crisis last year and ensuing economic slowdown, the South Korean government increased spending to spur growth. The Bank of Korea, meanwhile, aggressively cut its key interest rate to a record low 2 percent, where it has stayed for five months.

The central bank said Friday that manufacturing and exports helped spur growth. Manufacturing expanded 8.2 percent in the second quarter while exports grew 14.7 percent.

South Korean exports, which slumped from late last year as consumers overseas cut spending amid the global downturn, have shown signs of improvement in recent months. The country's trade surplus has been hitting record highs.

But the result was not all good news and showed how far the economy has fallen. When compared with the same period last year, GDP, or gross domestic product, shrank 2.5 percent. That marked the third straight quarter of year-on-year contraction.

The last time that happened was in 1998, when GDP shrank from the previous year in all four quarters, said Kang, the central bank economist.

Indeed, economists are widely predicting South Korea's economy will contract in 2009 for the first time since shrinking 6.9 in 1998.

Still, the outlook is better than it was earlier this year.

Kwon said Goldman Sachs recently revised its forecast, predicting a contraction of 1.7 percent in 2009 instead of the earlier expectation of a 3 percent shrinkage, given the strong stimulus impact in the first half and prospects for a recovery in exports in the final six months of the year.

http://www.fox43.com/business/sns-ap-as-skorea-economy,0,4755584.story

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Tuesday, July 21, 2009

Funny Video (Korean Language): Lee Hyori office episode


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Friday, July 17, 2009

Matthews Asia Funds analysts discuss investing in Korea

Korea, Revisited
Michael Han, CFA
Portfolio Manager
Matthews International Capital Management, LLC

Korea has gone through crisis before—it was one of the worst hit during the 1997–98 financial turmoil. And yet, Korea emerged from that test even stronger than before. Korea used its experience of crisis as a spur for further reform. At a basic level, growth comes from productivity improvements in the domestic economy—Korea understands this and has been developing its internal markets and labor skills. It has also remained open to the global economy, eschewing protectionism and embracing trade. These have all helped it negotiate crises in the past and will do so again. Indeed, Korea remains one of the richest economies in Asia and its success in navigating crises and the challenges it faces are probably being studied with keen interest in capitals around the region.

Thus far, Korea has been weathering the storm caused by global financial crisis better than expected. Its GDP in the first quarter remained flat while most of its peers in developed economies reported sharp declines. The nation's major exporters in the auto, IT and industrial sectors gained market share during the downturn, thanks in part to Korea's devalued currency. As a result, sentiment toward the Korean market seems to be turning positive compared to what it was only three to six months ago. Looking ahead, we believe it is essential for investors to understand the country's economic fundamentals as well as the opportunities and challenges Korea presents for them.

Lessons Learned

Ironically, one reason why Korea seems to be enduring the current crisis relatively well is because the nation experienced a major financial crisis in the not so distant past. The collective experience of Korea's government and businesses became a valuable asset when the country was faced with the current global crisis.

Two years ago, in a commentary titled, "Then and Now", Mark Headley vividly described Korea during the Asian financial crisis. Specifically, he commented on how then President Kim Dae Jung's progressive reform ended Korea's long-time protectionist policy when he opened the market to foreign capital, recapitalized banks and eliminated debt-ridden Chaebol companies. Chaebols, large conglomerates which had previously enjoyed government-sponsored easy money and protectionist policies, were forced to go through an unprecedented restructuring of balance sheets and governance models. Chaebols that voluntarily restructured themselves became role models for corporate governance reform. For example, their money making businesses began investing more in themselves to become globally competitive rather than subsidizing the firm's unprofitable businesses. As a result, their companies have taken market share from domestic and global competition and enhanced their market status. Korea took the view that there was no easy way out—companies had to pay down their debt and most heavily levered chaebols have delevered their balance sheets since then. Today, well-capitalized Korean companies are investing aggressively while their global competitors are struggling with deteriorating financials.

During the Asian financial crisis, there were also reforms in the supervision and oversight of Korea's financial systems. The nation's old accounting standard—influenced by the Japanese system, but considered next to useless in investment analysis—was replaced by a U.S. GAAP-style standard. The infrastructure for investing, including public disclosure rules and shareholder protection schemes were also enhanced, making Korea's market more transparent and investable. Such measures shore up confidence in times of stress by reducing the amount of uncertainty that investors face.

The playbook from the late-1990s became a valuable intellectual asset for Korean bureaucrats. During the 2005–2007 bubble period, Rho Moo Hyun (Kim's successor) implemented stringent lending policies to contain real estate prices that were being pushed by the global liquidity boom. In addition, banks were forced to double the loan loss provisions in good times. Such prudent policies saved Korean banks from major disasters in the mortgage sector that punished their peers in the developed world. That said, Korean banks still have problems of their own; for instance, they relied on short-term overseas funding for long-term assets. As the global credit crisis deepened, Korean banks faced difficulties refinancing their short-term debt and had to rely on government/central bank support for funding.

Human Capital—A Sustainable Growth Driver

Korea's past success came from its passionate people who work among the longest hours in the world. Education is a national obsession in Korea—as The New York Times reported, a parking lot attendant whose son becomes a doctor or lawyer is more admired than a millionaire whose children do poorly in school. Korea has achieved the most significant advancements in higher education penetration rates among Organisation for Economic Co-operation and Development (OECD) member countries; roughly 55% of the country's younger generation (25–34 year olds) achieved a tertiary education while just 10% of their parents' generation (55–64 year olds) reached the same level.

Korea's long school year—230 days—is also noteworthy and drew attention when President Obama's public school reform agenda pointed to the United States' relatively short 180-day school year as a significant problem. Fundamentally, continuous investment in Korea's human capital supports a strong long-term case for the country.

A Nimble, Diversified Economy

Through financial crises, Korea never turned its back on global markets and this has surely helped many of its companies sharpen their competitive positions. Korea has demonstrated that it can be very nimble in adapting to the ever changing global economy. In the early-1990s, developed markets such as the U.S., Europe and Japan, accounted for 45% of Korea's exports; today they represent just 30%. Textiles and apparel previously accounted for 14% of exports and now their contribution is under 5%. Korean companies are well diversified across the IT, industrial, material and domestically oriented sectors. Today, it is not hard to find global champions in each sector among Korea's publicly listed companies. At the inception of the current crisis, market observers took an overly negative view on Korea's export-dependent economy because of falling demand from developed markets. However, Korea seems to have fared better than its peers thanks to its more diversified export businesses and sizable domestic economy.

A common misperception regarding Korea is that the country will be squeezed between a more-developed Japan and a faster-growing China—this is often referred to as the "nutcracker" or "sandwich" theory. In reality, Japan has provided great role models for Korean companies—Korean companies have been adopting high-end technology from their Japanese counterparts while also gaining on them by leveraging a second-mover advantage.

Korean companies and individuals alike have been looking for opportunities in China. Korean companies from a wide variety of industries have been entering China not just seeking lower wages, but also taking advantage of the country's significant market potential. While Korean exports to the Western world have been confined to IT and industrial products, the country's exports to China have been more diversified to include consumer goods and services such as cosmetics and food; Korean exporters have also been able to leverage their strong brands and cultural proximity. From this perspective, a number of Korean companies offer solid investment cases as their businesses are enjoying growth in China but are traded at much lower multiples than their Chinese peers.

Challenges

Corporate governance, though improving, has been a challenge for investors in Korea. However, governance in Korea presents different issues than in the U.S. where problems have largely been derived from a conflict of interest between management and shareholders. In Korea, a company's founders typically control a large portion of the firm—as much as 30% to 50%. Therefore, issues regarding executive compensation and stock options are rare. Rather, Korea's governance challenges tend to arise from conflicts between a company's majority and minority shareholders. Low dividend yields and capital allocation issues are evidence of these conflicts. Given their high equity ownership, Korean management tends to be incentivized to invest for the company's long-term vision rather than with a focus on returning cash from operations to shareholders. Some insightful management teams have been successful in long-term wealth creation while others have not. In recent years, there have been significant improvements in the shareholder returns generated by companies that transformed into holding company structures. By transforming into a holding company, a company was separated into an operating business and an investing business. As a result, investors were given the option to own the operating business, which is required to increase shareholder return so that its majority shareholder can invest for future growth. Like in all markets, distinguishing management teams that can create value from those that will destroy it has been one of the most important criteria for achieving investment success in Korea.

Another significant challenge for Korea stems from the country's socio-demographic makeup. As the Korean economy advanced, the country's rigid labor market created a large pool of temporary workers. "Regular" workers are well protected by stringent labor laws, and the population of "temporary" workers—created to sidestep labor regulations during the Asian crisis—has grown rapidly among Korea's younger generation and women. As a result, the younger generation has been delaying marriage and starting families, causing Korea to have one of the most rapidly aging populations in the world. This brings new challenges, particularly in the development of pension systems and health care plans, but these challenges will also provide business growth for health care providers, insurance companies, asset managers and medical supply firms.

By any measure, Korea is far from perfect. However, recent history suggests that Korea has been largely successful in curing its own problems—and exceeding expectations in the process. More importantly, given that the nation still has room for improvement means it offers investors an opportunity for upside potential. Universally, a highly motivated people with a strong work ethic, ongoing investment in human capital, seasoned regulators, and continuous reform stand to make a sustainable investment case—we believe this is the case in Korea.


Korea Roundtable
This month Asia Insight focuses on Korea and features a conversation with the following members of the Matthews investment team:

Robert Horrocks, PhD, Chief Investment Officer
Michael Oh, Matthews Korea and Matthews Asian Technology Funds
Michael Han, CFA, Matthews Korea Fund
The information below does not constitute a recommendation to invest in any sectors mentioned.

Q: What industries do you think stand to benefit from the changes taking place in Korea?

A: Michael Oh
The industries that come to mind as people get wealthier in Korea are related to "protection," specifically insurance, wealth management and home security. Also, I think the corporate pension fund market is going to be a beneficiary and will grow in the future which is one reason why we are positive on brokerage and insurance companies.

A: Robert Horrocks:
I think companies in the wealth management area will change remarkably in how they communicate with their clients. At the moment, in Korea—not unlike any other country in Asia—people make their own investment decisions. They buy mutual funds through brokers or banks who act like brokers, paying big fees up front because the sellers act as an access point. Currently brokers are not particularly providing advice and this is an area where we anticipate growth—in the advisor type market.

Actually, Korea has done more than most to spur its pension fund and encourage it to look outside just holding fixed income and government securities and to try to get involved in equities and higher risk type of securities. Aside from what this does for companies and for Korean citizens, it also has an impact on the markets—it means markets should remain quite liquid and it may also act to dampen volatility.

A: Michael Oh
What Robert just mentioned has been one of the biggest missing pieces in Korea for many years. We're now seeing more long-term domestic institutional investors that are seeking returns in the equities market. This is a positive development that will improve the experience for all long-term investors in the Korean market.

Q: How has Korea's bond market developed?

A: Robert Horrocks:
Again, Korea has tried more than most Asian countries to spur the development of its corporate bond market. It was a particular policy focus after the Asian financial crisis in 1997–98, to try to develop the market and lessen the dependence of companies on banks for financing. There has been some success—the corporate bond market is bigger and better than what it was. It had some success for a few years after the Asian financial crisis but bank loans have continued to be an important part of the financial structure of Korean companies. It's an area in which Asia hasn't been particularly successful in the past. Yes, Asia has been successful in decreasing its reliance on debt since the last crisis, but the composition of the debt has remained largely unchanged. It will benefit all companies with long-term assets to be able to finance with long-term capital rather than short-term bank loans. Swapping out of short-term bank loans to longer-term corporate bonds could be an incredibly important development.

A: Michael Han
Recently, Korean companies have been able to pay back short-term borrowings from banks by issuing longer-term (3–5 year) bonds. Some companies we visited a few months ago were refinancing their bank borrowing with 3–5 year bonds to lock in their financing cost at current low interest rates. Low interest rates coupled with growing liquidity from a renewed risk appetite, the first half of this year was great time to issue bonds. In fact, bond issuance in the first quarter increased 75% over a year ago. It remains to be seen whether this is a tactical or a strategic change in the way Korean corporates finance long-term assets. It appears companies still value long-term relationships with banks and the flexibility in loan terms over issuing bonds.

Q: What is happening with Korea's currency?

A: Michael Han
The currency volatility in Korea stems from the fact that long-term funding in U.S. dollars is limited. One of the reasons the Korean won depreciated so much last year was because Korean banks did not have access to the long-term U.S. dollar credit market and Korea's exporters needed this long-term hedge.

A: Michael Oh
Korea's currency crisis wasn't about the strength of its companies or the competitiveness of the economy but rather, it was a liquidity issue. This is evidenced by the fact that Korea is currently recording one of its biggest trade surpluses in history. This demonstrates that Korean companies are quite competitive, even at the current currency level. Korea is not at equilibrium right now, the currency is still weak because of the liquidity issue.

Q: What are your thoughts on North Korea?

A: Michael Han
I think people tend to overestimate North Korea's power. For example, look at North Korea's "economic" power: their GDP is about 5% of South Korea's and their military spending represents 20% of South Korea's. I don't think North Korea will be a meaningful threat to the region—unless they change philosophically and turn into terrorists.

A: Robert Horrocks
The perception about North Korea always surrounds the problems it can create, but the potential upside is never mentioned. I think people underestimate the possibility of reunification and what that means for South Korea. It would give South Korea a vast amount of cheap labor. Korea's textile industry stands to benefit from having access to that kind of low cost labor.

Q: How does Korea compare to Japan?

A: Michael Oh
First, I think Koreans have learned a lot from Japanese companies—they had a good benchmark to follow particularly in the area of technology. Korean companies in general have followed Japan's technological development path very successfully and have actually gained market share over the last few years. Where Japanese companies have been slow to restructure, Korean companies have been able to fill in the gap. I think companies in Korea make decisions faster and have stronger balance sheets. We have seen this in the past six months as Korean companies were able to invest more aggressively, execute more progressive marketing plans and gain market share. However, having said all this, Japanese companies still have some of the best technologies in the world, if not the best, and Korean companies still have a lot to learn from them.

http://www.matthewsasia.com/about_asia/asia_insight.cfm
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Wednesday, July 15, 2009

Video: New Visit Korea Commercial


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Sunday, July 12, 2009

Wear hanbok to your next party?


http://www.koreaherald.co.kr/NEWKHSITE/data/html_dir/2009/07/13/200907130052.asp



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Saturday, July 11, 2009

Se Ri Pak Inspires a Generation of South Korean Female Golfers


By Rhonda Glenn, USGA
http://www.uswomensopen.com/news/pakinspires.html

The 1998 battle seems a long time ago, but it remains fresh in the minds of those who saw it and its repercussions are still being felt in a big way.

Eleven years ago this month, Korea’s Se Ri Pak, a poised professional, battled the pride of Timonium, Md., Jenny Chuasiriporn, a young amateur, for the U.S. Women's Open championship at Blackwolf Run, in Kohler, Wis.

The two met in a playoff. Head to head. Eighteen holes that became 20. Winner take all.

Chuasiriporn clinched her spot with a twisting 40-foot birdie putt that magically found the hole on the 72nd green. When the ball dropped, her eyes widened and she slapped her hand over her mouth.

Spectators, among them former U.S. President George H.W. Bush, went wild.

Moments later, Pak nearly pulled her tee shot into a water hazard on the same finishing hole. But Pak hit an expert iron shot and salvaged a matching 72-hole score of 290.

The next day, the two dueled in an 18-hole playoff that was extended to 20 holes before Pak gained the edge with a 15-footer for a birdie and the win.

It’s hard to overestimate just how important Pak’s victory was to the Korean fans.

Only the two competitors – Pak and Chuasiriporn – can know what their playoff was really like, but the 8,000 fans who came to watch that day raised the week’s total attendance to a record 123,000.

More important, however, all of Korea was watching, glued to their television screens in the early morning hours. And with them thousands of little girls, who began to idolize Pak.

Today, many of those little girls have grown up, and there are 36 Korean women playing in the 2009 U.S. Women’s Open at Saucon Valley Country Club. A handful are older than the age of 26, but most are in their late teens and early 20s, inspired by Pak's dramatic playoff victory.

Jiyai Shin, 21, is a winner on the LPGA tour and she was one of those little girls who watched Pak win the 1998 Women’s Open.

“It's amazing for me, because before Se Ri Pak won, I never know the sport of golf, and then Se Ri Pak won,” said Shin. “I watch it on TV. Oh, it looks like very interesting game. So after Se Ri Pak won, my friends, Inbee Park, many players started golf. She's our idol, actually.”

Park, 20, is the defending Women’s Open champion and when she won last year she became the youngest winner in history, just as Pak was in 1998. Park was mesmerized by Pak’s 1998 victory.

“I was very much inspired by Se Ri Pak,” said Park. “At that time, not just me, but a lot of young girls like me picked up golf and wanted to be like her. It was very early in the morning. I was half asleep.

“There were replays, a thousand times after that,” Park said. “I was able to watch it quite a few times. I liked what she did for the people in Korea. They were all happy with her and I think that’s what really inspired me. My dad…had been begging me to play golf two years before she won…After I watched that, it looked like very, very much fun and I really wanted to do it.”

Sometimes Pak is paired with her fellow countrywomen, occasions that mean so much to the young players.

“I’ve played a couple of times with her,” said Park of her rounds with her heroine. “It felt a little bit weird, because I never thought that I would actually be able to play with her in such a short period of time and be at the same level of competition. So, I felt very honored and I was very proud of myself that I actually made it all the way here.”

“The first couple of years it was a little bit of pressure,” Pak said, referring to the Korean youth movement on the LPGA. “If I was the one leading I needed to show them the right way to go. For some reason that’s kind of hard for me, but now it’s fun to watch them. They give me the energy because I’m still here practicing, playing, and when they see me they remember the long ago time that I was their age. Now it’s a fun time to hang out with them and I’m kind of friends with them.”

Now 31, Pak remains a contender on the LPGA tour. She finished second in the State Farm Classic a few weeks ago. She still bombs it out there and was 15th in driving distance this week, averaging slightly more than 260 yards off the tee. She was 5 over par after a first-round 76 at Saucon Valley, but struggled in the second round and seemed destined to miss the cut at 76-77-153.

But Pak is also thinking about her future, and beginning to make plans for life after competitive golf. In a year or so she plans to start her own golf academy in Korea. She wants to help young players such as Park and Shin, the players she inspired not so very long ago.

It’s a dream Pak has, but many of her dreams have already come true, as have the dreams of the hundreds of little girls who watched her win.

Rhonda Glenn is a manager of communications for the USGA. E-mail her with questions or comments at rglenn@usga.org
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Friday, July 10, 2009

Seoul Subway is replacing paper tickets with RFID smart cards

ST wins Seoul subway order for RFID chips
Peter Clarke EE Times Europe
http://www.mwee.com/218401198

The world's first RFID-based scheme for single-journey reusable ticketing in mass transportation has recently gone live in Seoul, South Korea, and is expected to save some 3 billion won (about $2.4 million) per year. The system is based on RFID technology from STMicroelectronics.

The New Transportation system introduced a refillable traffic-card system called T-Money, alongside conventional paper tickets for cash-paying passengers. Now, to save the cost of providing more than 450 million printed paper tickets every year, estimated at 6.8 won each, the Seoul Subway is replacing its paper tickets with RFID smart cards called Single Journey Tickets.

Each ticket contains ST's SRT512 contactless memory chip, which has features that allow the cards to be returned and re-issued to new passengers. ST has worked with card issuer Korea Smart Card Co. Ltd. (KSCC) to optimize the SRT512 to support the subway's ticketing system.

The SRT512 is designed for short-range applications meeting ISO 14443-B that need re-usable tokens, such as access-control, event-ticketing and mass-transport ticketing. To operate effectively in these applications, the device features a built-in anti-collision mechanism to prevent conflicts with other nearby cards.

ST has also previously collaborated with KSCC in the introduction of the T-Money pre-paid transport card. Accepted in buses, subway and taxis, these cards can also be used as an e-purse enabling low-value payments in shops in Seoul. The T-Money pre-paid card is based on the ST19WR contactless smartcards and has been deployed in large volume for two years. ◦
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Monday, July 06, 2009

Daewoo is losing money and facing a liquidity crisis

GM's Korea Problem
The automaker's Korean subsidiary, GM Daewoo, is losing money and facing a liquidity crisis. But it's too important to GM's future to jettison
By Moon Ihlwan

Even as Asia asia remains a bright spot for General Motors, its Korean subsidiary looks more like the hapless parent company than GM's fast-growing Chinese operations. GM Daewoo Auto & Technology lost $702 million in 2008, and this year its sales are off by nearly half, to 261,000 vehicles in the first six months. Now the Korean unit says it's on the cusp of a critical liquidity crunch. "Things look ugly at GM Daewoo," says Stephen Ahn, head of research at brokerage LIG Investment & Securities in Seoul.

GM Daewoo's woes stem largely from its close ties to the rest of the global auto giant. The unit made about 900,000 cars and shipped kits for an additional 1 million vehicles for assembly at factories in other countries last year, accounting for about a quarter of all GM auto sales worldwide. But some 90% of those cars are branded as Chevrolets, Buicks, and other GM nameplates that have seen sales plummet.

Given the losses, why doesn't Detroit just jettison the unit? GM Daewoo is too important to the future of bankrupt GM. bankrupt gm The unit is a key developer of small cars for GM's global lineup, it's a vital source for engineering and parts for the China operation, and it makes a new Chevy compact that is set to face off with the Toyota Corolla and the Honda Civic. "GM Daewoo will play a more important role in the new GM's global business strategy," says Michael A. Grimaldi, president of the Korean operation.

Korean carmakers want to stay ahead of China
That has left GM Daewoo scrambling to strengthen its finances. In December it had total debts of $6.8 billion. Since February, when it exhausted $2 billion in credit lines, the carmaker has sought new loans from the Korea Development Bank. The government-run lender arranged GM's takeover of bankrupt Daewoo Motor in 2002 and still holds a 28% stake. In May the KDB let GM Daewoo defer $500 million in payments. Before handing over more cash, though, the bank wants GM to commit to maintaining a big presence in Korea—something GM can't easily do until Washington approves its restructuring plan.

Seoul wants a guarantee because it's worried about Korea's position in the auto world. The country now offers a good compromise between high-cost, high-quality Japanese automakers and the low-cost Chinese auto industry, chinese auto industry whose automakers have a reputation for building shoddy vehicles. But that advantage "could end in just a few years as China catches up," frets Lee Hang Koo, an analyst at the Korea Institute for Industrial Economics & Trade, a government-funded think tank.

The KDB is also seeking collateral, such as more shares in GM Daewoo. The KDB says GM has balked at that, though the automaker declines to comment. Another debt-stricken Korean carmaker, Ssangyong Motor (controlled by China's Shanghai Automotive Industry), sought court receivership in February after the KDB refused to shore it up. Bailing out GM Daewoo without getting something in return could raise cries of unequal treatment.

Still, given the importance of GM Daewoo to both GM and the Korean economy, some kind of deal is likely. GM needs the Koreans' design chops, and Seoul doesn't want to lose the tens of thousands of jobs provided by GM and its hundreds of suppliers. "Something will be worked out eventually," says Suh Sung Moon, an auto analyst at brokerage Korea Investment & Securities in Seoul. "Neither the U.S. nor Korea can afford to let it go."

http://www.businessweek.com/globalbiz/content/jul2009/gb2009076_342788.htm
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Saturday, July 04, 2009

Restructuring South Korea's chaebol

Is the government taking a hard enough line with indebted conglomerates?

ON THE face of things, the restructuring of South Korea’s heavily indebted family-owned conglomerates (chaebol) is proceeding apace. On June 28th the eighth-biggest, Kumho Asiana, said it would sell its one-third stake in Daewoo Engineering & Construction, one of its biggest units. Past governments have coddled chaebol, but the current one says free-market principles should prevail. Regulators say that they have been urging banks to take a hard line with nine struggling chaebol, including Kumho Asiana.

In addition to Daewoo, Kumho Asiana owns Asiana, the country’s second-biggest airline, and petrochemical, tire, life-insurance, resort and transport businesses. As with other chaebol, descendants of the founder still control the business.

In 2008 it used its airline and Daewoo to become the biggest shareholder in South Korea’s biggest logistics company, Korea Express. That acquisition, along with the purchase of Daewoo in 2006, has left it with debt of 15 trillion won ($11.8 billion). Moreover, the 18 South Korean banks and other investors that had bought almost 40% of Daewoo alongside Kumho Asiana are likely to exercise an option in December to sell the conglomerate their shares at a price of 31,500 won—over three times the level of June 26th. So Kumho Asiana needs to find another 4 trillion won.

The likely buyer of Daewoo is the state-owned Korea Development Bank. It has said it will create a special private-equity vehicle to that end. Several weeks ago it offered to buy Kumho Asiana’s holding at a 30% premium to the market price. That would still leave Kumho Asiana about 1.7 trillion won short of its obligations under the put option, according to CLSA, a broker.

Korea Development Bank has also said that it will give Kumho Asiana the “right of first refusal” if it decides to sell the Daewoo stake. This idea has Seoul’s financiers fuming. They do not see why the bank should be doing Kumho Asiana any favours. In its current form, they argue, its offer to buy the shares amounts to a bail-out. They note that Korea Development Bank is also in negotiations to buy a unit of Dongbu group, another indebted chaebol. They worry that the lender will end up impeding genuine restructuring.

But for all its talk of free markets, the government does not want any big chaebol to go bust. It is haunted by memories of the Asian financial crisis of 1997-98, when high corporate debt helped to sap investor confidence and spark a run on the won.

The irony is that most South Korean firms are in much better shape these days. They have cut their debt dramatically since the crisis and keep far more cash on hand. In December 1997 the average debt-to-equity ratio of firms listed on Seoul’s stock exchange was 425%; in May this year it was 130%. Their cash reserves have risen from 10 trillion won in late 1999 to 78 trillion won at the beginning of this year. There are clearly plenty of South Koreans who have warmly embraced restructuring.

http://www.economist.com/businessfinance/displaystory.cfm?story_id=13962534
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Thursday, July 02, 2009

Wonder Girls make U.S. debut in Seattle

원더걸스 美신문 1면 장식 눈길…“한국의 팝 센세이션”
http://tinyurl.com/lc94lb

Hailing from South Korea, the Wonder Girls kick off their American tour in the Northwest, opening for the Jonas Brothers in Portland and Seattle; the tour includes other dates along the West and East coasts, too.

http://seattletimes.nwsource.com/html/musicnightlife/2009385102_wondergirls26.html



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