LG chairman leads mutual growth

Executives of LG Electronics hold hands together with CEOs of LG’s subcontractors during an “LG Partners’ Day” event at the company’s headquarters in Yeouido, Seoul, last week. / Courtesy of LG

Conglomerate initiates collaborative plans with partners

By Kim Yoo-chul

LG Chairman Koo Bon-moo

LG Group is stepping up efforts to foster shared growth by supporting its parts suppliers.

According to sources at the group, Chairman Koo Bon-moo ordered chief executives of its top-tier affiliates to implement various programs to help key suppliers expand their overseas businesses in a stable manner.

"You should keep in mind that suppliers are LG’s valuable assets for balanced and mutual growth,’’ Koo was quoted as saying in a statement, Tuesday.

Under the initiative, CEOs of the group units are responsible for implementing six collaborative programs.

They are a win-win fund for partner firms; faster reflection of material price changes in parts purchasing; support for indirect suppliers; a joint technology development center; support for hiring activities of small- and medium enterprises (SMEs); and fostering ``global best companies.’’

``The chairman believes LG can’t survive without help from our partner companies. The group is offering substantial support to our suppliers in human resources, innovation, communication and corporate social responsibility (CSR),’’ said LG spokeswoman Kim Min-jeong.

A strategic approach to LG’s supply chain management (SCM) has resulted in a solid and loyal network of partners.

"For a better supply chain, LG Group has also implemented a number of other methods to ensure better sustainability,’’ the spokeswoman said.

LG Electronics, LG Innotek, LG Display and LG Uplus recently held their own "Partners’ Day’’ with their main suppliers.

Lee Sang-wook, the spokesman for LG Display, said ``amid fiercer competition, both big companies and SMEs are struggling to better survive.

LG Display has a very fine-tuned strategy for mutual growth with shared roles, and supports partners rather than pursuing our own survival.’’

LG Electronics, the world’s No. 2 manufacturer of televisions, has recently signed a ``green partnership’’ with its suppliers.

Under the agreement, LG Electronics created an 8 billion won fund to help them develop patents in next generation business areas such as light-emitting diodes (LED) and solar cells.

LG Display and LG CNS are also collaborating with their key local partners to jointly develop patents by offering incentives, sizable subsidies and sharing profits, while mobile affiliate LG Uplus launched an ``LTE Open Innovation Center’’ two years ago for collaboration with SMEs for applications.

"LG Chem allows our partners to lend needed money with very low interest rates as we are able to support them via our mutual fund and all LG affiliates pay only cash to suppliers to help them get a better cash flow,’’ said LG Chem spokesman C.S. Song.

High returns

LG’s differentiated management program pursuing mutual growth is yielding high returns, according to LG officials.

Top Engineering, one of the local suppliers of LG Display, was the first to develop a glass-cutting system (GCS) technology, which is vital in manufacturing LCD panels.

The development was a milestone as LG Display was previously paying royalties to Japanese companies in return for using their GCS technology.

"Top Engineering is collaborating with LG Display in key raw equipment devices for use in producing LCDs and OLEDs over the last two decades. LG Display is very active in sending technicians and offering knowhow. The key point is LG Display using the developed GSC equipment in almost all our LCD fabrication lines in Paju, where our key LCD facilities are located,’’ said LG Display spokesman Lee.

LG Display is the world’s biggest supplier of LCDs.

Shinsung Chemical is another case that saw external corporate growth outside the Korean Peninsula with the help of LG Electronics. Shinsung produces components for use in refrigerators, washers, televisions and home theaters.

The local parts supplier asked LG Electronics to invest in its plans to build its first Russian factory.

LG Electronics offered administrative and financial support, and even paid for the real estate. LG also sent legal advisors to tackle any unexpected issues.

In January 2006, Shinsung opened the Russian factory and the company is now using LG Electronics’ proven purchasing, logistics, inventory and management systems.

In 2011, Shinsung’s annual revenue rose to $30 million from $3 million in 2006, according to a statement from the group.

"LG is steadily helping partner companies improve their products quality and technology and advance delivery dates so they could build solid trust with the LG Group of affiliates,’’ said spokeswoman Kim.

"Overall, those programs contribute to achieving technological collaboration rather than one-way communication,’’ she added.