By Kim Yoo-chul
Can LG Electronics' new CEO Koo Bon-joon turn the company around?
Koo, a scion of the founding and owner family, is moving in after Nam Yong resigned, being held responsible for a boneheaded strategy that forced LG to pay for a late start in the smartphone business.
Judging by market reactions, the news of Koo's appointment, the younger brother of Group Chairman Koo Bon-moo, is being well received. Nam's departure had been widely expected for a faltering bottom line and an unviable business plans.
Of course, the capricious market appears to be ready to turn against him, unless he shows leadership at an early date. Besides, some foreign investors may find Koo's rise to be typical of Korea's family-oriented corporate governance.
"The importance of the CEO cannot be overestimated in the corporate culture of Korea," said a top-ranking industry executive, in a phone interview with The Korea Times, Wednesday.
"Koo should provide for action, boldness and strategy," said the executive.
Koo is known for being straightforward, LG officials say, comparing him to a thoughtful Nam Yong.
The 59-year-old Koo is credited with drawing $1.6 billion in investment from the Dutch-based Philips for a thriving joint venture. Now Philips and LG are parting ways.
With a master's in business administration at the University of Chicago, Koo started working for LG in 1987.
He served as CEO at LG Semiconductor ― now Hynix Semiconductor ― in 1998. From 1999 to 2004, Koo had been leading LG's flat-screen business. Since 2007, he has been leading LG's trading arm ― LG International.
LG officials say Koo, a stakeholder in the firm, will have a bigger say than his predecessor in budget allocations and investment.
"Vice Chairman Nam was trying to maximize profit with cost-cutting and restructuring but Koo is totally different in management style," said a senior LG executive.
It has been widely expected the new vice chairman will realign business portfolios and investment plans in facilities, all capped by a big-scale management reshuffle.
"Koo is not a marketing expert. Based on his 25 years of hardware experience from semiconductors, chemicals, displays to consumer electronics, the CEO will favor technology-related staff members," added the executive.
As for the fate of the foreign LG executives, an LG Electronics spokesman declined to comment.
"Vice Chairman Koo will have time for thorough reviews over the performances of these foreign executives. But they will also be given the same guidelines for evaluations as their Korean counterparts," an executive said.
Another key issue that is drawing market attention is LG's intention to invest in Hynix Semiconductor.
Referring to Koo's boldness and deep involvement of semiconductor business, a growing number of stock analysts are joining the ranks of LG's changed stance towards the world's second-biggest computer memory chipmaker, though a top LG Group's communications officer cut the speculation.
Last week, executive vice president of LG Group's corporate communications Chung Sang-kook, said, "The new CEO has not changed its existing stance of not looking to buy Hynix."
"Creditor banks are asking us to purchase a stake in Hynix but we have no plans to buy the chipmaker," Chung said.
Sources said the new CEO will boost efforts to revive the sagging momentum of smartphones and televisions and added seeking a large-scale acquisition deal is currently out of focus.
During the second quarter of this year, LG Electronics' total sales were 14.4 trillion won or $12.4 billion, a drop of 0.7 percent year-on-year, while the quarterly net profit was down 33 percent during the same period.
"It seems difficult for the new chief executive to completely change Nam's strategies for smartphones in the latter half," said a Seoul analyst.
Under Nam's reign, LG produced good results in design-focused feature-phones such as the New Chocolate and Prada lines.
But in terms of smartphones, LG is lagging behind.
Japan-based brokerage Daiwa Securities is crediting Nam's departure to ownership will help more room for massive investment and faster decision in key issues.
Citigroup expects LG to save time in its fundamental turnaround by implementing updated strategies faster but added LG will not get out of its current position this quarter or next.
"Nam's aim to turn LG into a truly international company was persuasive but it is not enough," said Lee Jong-su, a media critic at Hanyang University.
"Korean conglomerates will not give up their edge in manufacturing-focused businesses. I don’t think they will become truly software-driven companies. Rather, they hope to narrow the gap by partnering with others not shifting towards software," said Lee.