AUGUST 9, 1999 VOL. 154 NO. 5

Time's Up, Chairman Kim
Seoul tells banks to take the wrecking ball to a legendary industrialist's crippled empire
By DONALD MACINTYRE

In a country of workaholics, Kim Woo Choong's dedication to his job is legendary. As far as anybody knows, the Daewoo chairman has taken only two days off in three decades--for his daughter's wedding and his son's funeral. He claims to sleep only five hours a night, his wife says four. He once spent a year and a half working and sleeping at one of his shipyards. He bolts down his meals to save time, and has no patience for leisure activities, including golf. "Even I recommended that he play," says Daewoo Motors Chairman Kim Tae Gou (no relation). "He can't find the time." Last year, when a cerebral blood clot put him in the hospital for five days, he started calling his executives almost as soon as the anesthesia wore off.

That obsessive work ethic has helped Kim build Daewoo into one of the country's top chaebol, a conglomerate with $76 billion a year in sales and products ranging from autos to ships to financial services. But in late 1997, Korea's economy imploded, and some risky bets in emerging markets went sour. When Daewoo's debts soared to $56 billion this year--just $2 billion less than Korea's record bailout from the International Monetary Fund--even Kim's iron will wasn't enough to hold the empire together. Last week, the government lost patience, telling creditor banks to take the wrecking ball to the Daewoo group. When the dust settles, the automaking arm and a few other lines will likely still carry the Daewoo name ("Great Universe" in Korean), but the group is likely to be finished as a major player. It was a staggering comedown for one of Korea's best-known businessmen. Says Namuh Rhee, head of research at Samsung Securities: "Kim didn't understand that the world is changing."

Seoul's stock market swooned earlier this month as Daewoo sparred with creditors. The sudden collapse of the conglomerate, which provides 80,000 jobs in Korea and accounted for some 13% of the country's exports, could have derailed Korea's budding economic recovery. But the government pushed the creditor banks to extend payment deadlines on Daewoo's debt and pony up $3.3 billion in new money, enough to keep it on life support. Then it asked the banks to look over Daewoo's shoulder, to make sure it got on with restructuring. (Daewoo claims it is still in charge of the process.). The move was a clear signal to other big chaebol, who have been slow to reform their own debt-heavy operations. "It sends a very scary message to all the chaebol owners that 'This could happen to you,'" says James Han, a financial analyst at Jardine Fleming Securities in Seoul.

The irony is that it happened to Kim, a man who always had the magic touch when it came to fixing dud companies. Back in 1976, the government asked him to take over an ailing heavy-machinery maker nobody wanted. Within a year, he had merged it with another company and turned a profit. His greatest triumph was turning around the state-run Okpo shipyard. It was drowning in so much red ink even Kim didn't want to touch it. So Park Chung Hee, then Korea's President, signed it over to Daewoo while the chairman was out of the country. Kim turned it into the world's second-largest shipyard.

Kim's talent for business was obvious early on. The young Kim supported the family selling newspapers. He learned he could steal business from rivals by scrambling to deliver the papers early, then going back to collect the money later. After a few years at a trading company, he used a $10,000 loan to set up a textile trading firm in 1967. Within a decade, Daewoo's exports topped $400 million. By the 1990s, Kim was running one of the biggest businesses in the world.

He moved aggressively to build auto and electronic plants in emerging markets like Uzbekistan and Poland. But when Korea's overextended economy collapsed, the new government of President Kim Dae Jung called for sweeping reforms--and targeted the chaebol for downsizing. Many Koreans blamed the chaebol's sometimes reckless expansion policies for sinking the economy. Hyundai and other conglomerates have managed to stall for time--Daewoo's debts were too big.

Kim was his usual energetic self last week, associates say, putting in 16-hour days. His plan? Whittle the group down from 41 businesses to a more manageable nine--in autos, trading and finance. "Kim can take care of this problem," predicts Daewoo Motors' chief. In any event, it seems clear that the famous workaholic will have more time for golf in future.

With reporting by Roger Dean du Mars/Seoul