Posted : 2012-03-21 19:26
Updated : 2012-03-21 19:26

LG shrugs off doubt, comes back with vengeance

LG Chairman Koo Bon-moo, center in the front row, makes comments after he was briefed over the company’s sales strategy for OLED 3D televisions during his visit to LG’s technology compound, this month. At left in the same row is LG Uplus CEO Lee Sang-chul and LG Electronics Chief Technology Officer Ahn Seung-kwon is on Koo’s right. / Korea Times file

Chairman boosts can-do spirit in workforce, affiliates respond with better bottom lines

By Kim Yoo-chul

LG Group is recovering with the group’s export-driven affiliates including LG Electronics, LG Display, LG Chem and LG Innotek leading the way.

And the industrial conglomerate is set for another impressive chapter in its story this year led by Chairman Koo Bon-moo as it is returning to basics ― a technology-driven corporation.

Koo is the eldest grandson of LG Group founder Koo In-hwe and has been in his current post since 1995. He is credited with boosting the group’s sales four-fold and its market capitalization 10 times.

``Last year wasn’t good. But this year we have no doubt that the group will regain its power buoyed by the brighter performance of LG Group companies. That’s partly due to the chairman’s consistent request for technology,’’ said LG spokesman Jeong Jung-wook.

For 2011, LG Electronics made a small profit, while LG Display, the group’s flat-screen unit, reported a 920 billion won operating loss. The component maker LG Innotek also suffered from an operating loss of 67 billion won.

``It’s positive that LG affiliates are getting stronger to secure their bottom lines even amid a cyclical market downturn. Under Koo’s chairmanship, LG is seeing an improvement in management,’’ said Jeong.

The financial markets seem to agree with Jeong. LG Electronics is forecast to report some 200 billion won in operating profit for the first three months of this year.

LG Innotek is also expected to see a turnaround in the current quarter, ending losses for the two previous quarters. LG Display will recover in the second quarter with its operating profit for the April-June period reaching over 250 billion won.

``Chairman Koo is fully cooperating with LG Electronics CEO Koo Bon-joon, who is also his younger brother, on pending issues. This is the really good thing,’’ said an executive from LG Electronics, asking not to be identified.

The LG chairman’s initiatives for hardware have resulted in LG Electronics rolling out advanced smartphones using long-term evolution (LTE) wireless technology.

LG has so far sold over 2 million Optimus-branded LTE phones. LG said it sold 600,000 Optimus LTE handsets during the first three months the phone was available. The company also sold 8,500 in Japan on the day of the phone’s launch.

Another reason things are improving for LG is it is seemingly safe from a possible management feud within the family ownership ― the common problem for all Korean conglomerates ― because LG markets itself as ``the first major Korean corporation to introduce a holding company structure with advanced corporate governance.’’

In 2003, LG completed a ``radical chaebol framework’’ to become LG Corp., ― an American-style holding body for LG’s various businesses. ``Thanks to the system, LG affiliates can focus on their jobs. Coupled with market recovery, the system is helping the group see better future,’’ said Jeong.

When compared with other conglomerates, such as Samsung Group, whose founding family has been under fire in recent years for tax evasion and murky corporate governance, LG appears to operate much more transparently.

While Samsung Chairman Lee Kun-hee was suffering setbacks in his attempt to evade paying inheritance tax, the Koo family was taking silent, steady steps in its own succession plan, determined to continue the family tradition.

The LG chairman weighs in as Korea’s 12th richest person, with Forbes valuing his net worth at some $1.4 billion in March 2011.

Technology leadership

The chairman’s attention to ``wow technologies’’ is helping LG lead its rivals in high-end digital devices.

Partnership with its suppliers are strengthening because Koo Bon-moo is focussing on ``balanced and mutual growth.’’

He has urged his lieutenants to roll out a highly-advanced flat-screen TV using the latest organic light-emitting diode (OLED) technology. Compared to the industry’s mainstream of LCD and plasma TVs, OLED sets are thinner and brighter. Major TV makers are migrating to OLED TVs to find new momentum amid the flattening demand for conventional televisions.

``I want to see a 55-inch OLED TV earlier than scheduled. We should have more stakes in the rising market and that means I definitely want LG to lead the new TV market,’’ said Koo.

It’s rare for him to identify a certain product that needs more investment but the chairman’s requests to go back to basics have paid off so far.

One example is the increasing market shares of LG’s 3D TVs, even though it was late to the game. The LG Group chairman had asked affiliates to collaborate to challenge Samsung Electronics in 3D TVs.

Now, LG’s film-patterned 3D technology is steadily gaining popularity. Top Japanese TV makers such as Sony and Panasonic have begun selling their 3D TVs using LG’s technology in China and the United States respectively.

LG Display makes displays with component supplied by LG Chem and LG Innotek while LG Electronics makes the 3D TV sets.

``We need to speed up the development of cost-effective OLED displays. I will directly handle this,’’ said Koo.

The chairman asked affiliates for no ``wrongdoings’’ in management and that has come after Samsung Electronics received the largest-ever fine for obstructing an inquiry from Korea’s trade regulator, which was investigating deceptive mobile phone pricing practices.

Management and other Samsung employees delayed investigators during an on-site visit, deleted data on computers and submitted false information, the Fair Trade Commission (FTC) said in a statement. Samsung was fined 400 million won.

LG Electronics was also fined by the FTC for improper mobile phone pricing practices. ``Such improper activities are intolerable to me,’’ said Koo.

Jeong said the group is investing more for projects with LG suppliers aimed at mutual growth and encouraging them to offer value-added products.

``This is part of LG’s plan to strengthen competitiveness in research and development. On-time delivery, pricing and product commitment are the top words for LG to customers and support from our suppliers is vital,’’ said Jeong.
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