How was the TL?

  • It was bad

    Votes: 1 4.0%
  • It was okay..

    Votes: 10 40.0%
  • It was good.

    Votes: 10 40.0%
  • The idea was't great, execution was.

    Votes: 2 8.0%
  • The idea was great, execution wasn't.

    Votes: 2 8.0%

  • Total voters
    25
POD: A promised Deal
November 1996
Samsung HQ
Seoul, Republic of korea
.

It was cold outside the Samsung HQ that morning, but it didn’t snow. In Samsung office, I waiting for the Representatives from Hyundai, Hanjin, and Daewoo, in the dark office. I was alone, with the eerie silence in the background. Although I didn’t exercise today, as I came there on the subways, but a cold sweat could be felt on my face. I was worried whether I will fail the negotiation, or How I can tell my wife and kids that I wouldn’t be home for Christmas. Just as I reached my desk and pick up the phone to call my wife, I heard a roar outside. I looked out the window, and I saw three black sedans coming close to the HQ.

Several Minutes later, three men, wearing black or gray business suits, walked to the tables. “good morning, mr. Hyunu Choi, Mr. Sanghyun Jung, and Mr. Min-Tae Seo. Please have a seat here.” Mr. Hyunu Choi, a chubby man wearing glasses was from Hyundai, Jung ,a tall man with a dog-like face, was from Daewoo and Seo, a muscular but thin, man, was from Hanjin. They took a seat. The room was silent for a moment. I wanted to say the plan, but I was sweating as if this deal fails, I could lose my job. I had my family to feed. I asked, “So, I invited you here because I want to discuss about formation of Consortium, which will be necessary for purchase of Fokker.” They were not amused. And some of them were indifferent at it “Why do you ask us for this? Could you buy the company on Your own?” Mr. Seo said.

The room was silent for a moment. They were direct competition to us. And they couldn’t cooperate with us this easily. “How we could face the tough costs and Fierce competition?” He had a point. Bombardier had CRJ-200s and Dash 8s, British Aerospace had BAe-146, and Embraer was coming up with EMB-120s turboprops and planning for a regional jets of its own. And for cost, we can’t make up for deficits. I suddenly had a cold sweat. If the Samsung make such a purchase, we could run out of money like Hanbo group. I could envision myself being forced out of my job when Samsung going bankrupt, no way to feed the entire kids, and living out homeless in Seoul station. I needed to think of a way somehow. Something that can convince the representatives, while saving the entire Samsung Corporation. Meanwhile, Mr. Seo asked for a coffee as he was thirsty. I said yes. And got out the seat, and poured the instant coffee in the paper cup and made some hot coffee. When I served it to the whole guests, they really liked it. After we had coffee, we threw the cup away in trash bag. Suddenly, My brain just hatched an idea. What if we liquidate the Fokker after fully acquiring their technology, similar to how we use paper cup? And then found a new fully Korean company?

I responded. “We are not looking for the main competitors, like Boeing or airbus. But on smaller 70 to 130-passenger, regional jet or turboprop aircraft, which can carry passengers for short destination. Also, we could use this technology to improve South Korean aviation industry.” I responded. “If we can’t support it?” the three said in unison. They had a point there. “We should liquidate the entire company after taking the technology from the Fokker, they have a pretty good knowhow of building aircraft, which will be useful when we found a fully Korean aerospace company.” I responded. Mr. Choi said, “This was surprisingly a good idea. Let’s go with your plan.” And all four agreed. I came up with the plan to buy the Fokker aerospace company and just acquire the technology, and then, liquidate it, to be replaced with the fully Korean consortium. And this helped to strike a deal with the companies.

A few days later, I met Woo-Jung Kim, the owner of Daewoo, and Chung Ju-yung, the owner of Hyundai group, and Cho Yangho, the owner of Hanjin group, and Lee Kun-hee, the owner of Samsung. It was the first time that I met them in person. We cut the ribbon for Korean Fokker consortium, a Korean aerospace company and an airplane manufacturer. And many cheered. When the ceremony was over, a man with a round face and wearing glasses, walked to me. “Congratulation on striking a deal with these companies and forming a consortium. How did you do it?” I responded, “It took some ideas from unexpected places.” It was true. The ideas can come from unexpected places.
 
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Excerpt from The New York Times, January 12, 1997

Samsung Buys Fokker N.V. for 1.5 billion Dollars


SEOUL--Samsung had acquired Dutch aircraft manufacturer, Fokker N.V. for 1.5 million dollars after other aircraft manufacturer--Hyundai, hanjin, and Daewoo-- accepted its offer to found a consortium. these manufacturers will form Korean Aerospace Corporation.

although receivers of Fokker had failed to reach agreement with samsung in november, the talks renewed in december, after the consortium was agreed upon. they finally reached agreement in January 11. (AP)
 
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After Korean Aerospace Consortium’s purchase of Fokker N.V., Samsung decided to keep the production of Fokker 100 running. But its real gain from the merger was of its technologies, which Fokker incurred after it participated in F-16 Falcon Consortium, in which Fokker built the aircraft.

This lead to some new changes in korea’s plan to acquire medium range fighters. as F-4 was already becoming old, Korean Defense department announced plans for buying 120 Medium fighters. in response, EADS entered its Eurofighter typhoon, Russian Sukhoi entered its Su-37, and MD entered its F-15E strike eagle, and Dassult entered Rafale.

The first sight for this competition for fighter aircraft entered stage in Seoul Air show in 1996, in which said aircrafts were showcased, except for Eurofighter Typhoon, which was suffering from delays in its production. Their plans changed with Samsung’s acquisition of Fokker N.V. which now stated license-building should be part of it.

But this project met its obstacle in 1997…
 
Chapter 1: the falling dominoes part 1 (1)
From Korea Herald, January 23, 1997

Hanbo Iron and Steel declares Bankruptcy with debt of 5.85 billion dollar

Hanbo Iron and Steel declared bankruptcy after defaulting on a loan, making one of Korea’s largest corporate bankruptcies.

this debt was caused by Hanbo's attempt to construction of steel mill at Tangjin, initially estimated to cost 3 trillion won, now costed 5 trillion won. Bank representatives said that it was caused by hasty business expansions and rising debts, which brought the company to its knees.
 
Chapter 1: the falling dominoes part 1 (2)
From p.49 of The Clipped Wings: Korean aviation in Asian Financial Crisis by Min Myong-ho(2006)



The collapse of Hanbo Iron and Steel revealed the dark side of the mighty legend that was Hanbo Group. Once the company behind the South korea's symbol of wealth, Daechi-dong's Unma Apartment in Gangnam District. It was revealed that Chung Tae-Soo, the owner of Hanbo Group, had lobbied the government to get extra loans to keep the company afloat. As the consequences of this, Hanbo iron and Steel declared bankruptcy and Resulted in bankruptcy, which led to more companies collapsing, including Sammi group in March 19, and Jinro in May 13. Bankruptcy of many Chaebols, including KIA group and Sammi.


This had hit the Aviation industry as well. Korea Aerospace Corporation, just having bought Fokker last year, had incurred debts of 423 billion South Korean won or about 583 billion won in present values. In response, Samsung Aerospace had to cancel various projects, including Fokker 130, and stick to production of Fokker 100. However, this seemed not enough to save the company as the debts kept growing despite this.


All of this changed in June 1997. When South Korean Ministry of National Defense ordered 20 more F-16s from Samsung-fokker for KFP program. Although most of the Air force weapons programs were cancelled due to the Asian financial crisis, the air force kept the plan for FX program, instead, they decreased the number from 120 airplanes to 60. But the KFP almost over, so KAC demanded additional procurement of KF-16. However, the program was nearing its end, so the KAC demanded MND to order more KF-16. Short on money, Korean government had to make a choice:The Korean government decided to make a compromise: to decrease the number for FX program to 40—with an option to buy 20 more if economy improves, and order 20 more KF-16 from KAC with fund from Korean Ministry of Trade and Industry for supporting of Korean aviation industry. this satisfied both KAC and Korean air force, as Korean air force could have the FX program continued, and KAC was saved from bankruptcy.
 
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The Falling Dominoes part 1(3)
SsangYong Motor declares bankruptcy!

Korea herald, November 2, 1997

Ssangyong motor were finally declared bankrupt after Daewoo declined to the company, citing the 1.7 billion dollar debt.

Ssangyong Automotives were under deficit from 1993, which resulted in debts, which led to kim Woo Jung to decide against the purchase of the Ssangyong.

The Kim woo jung said: The debts that Ssangyong motors has would bankrupt the company, it is too heavy to bear.

(Continued in page 3)
 
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