By Lee Hyo-sik
Daewoo International, headed by CEO Kim Young-sang, has decided to change its name, hoping this may help it ride out a host of difficulties.
It was unusual for the company to retain its name after being acquired by POSCO, Korea's largest steelmaker, in 2010. Normally in a takeover, the buyer changes the name of the acquired firm to inject its own identity.
But POSCO has allowed the struggling trading and resources development company to keep its name for so long in a bid to appease disgruntled company employees, most of whom yearn for the good old days when the now-defunct Daewoo Group "ruled the world."
With the firm plunging into a slump amid falling commodity prices and sluggish global trade, it has finally decided to be a part of the POSCO family.
To show its affiliation with parent POSCO, the new corporate name will likely include the word "POSCO." Given its need to retain the Daewoo brand, which is well known abroad, Daewoo International will likely be renamed POSCO Daewoo.
The high-profile conflict between former Daewoo CEO Jeon Byeong-eal and POSCO Chairman Kwon Oh-joon in June is also said to have prompted the trading firm, headquartered in Songdo, to alter its corporate title.
At the time, Kwon ordered Jeon to step down, but the latter refused, sparking an unprecedented internal feud. Jeon openly protested POSCO's plan to dispose of its stake in a Myanmar natural gas project. A month later, Jeon was replaced by current CEO Kim.
The question now is whether the new corporate name will provide a boost to Daewoo International, which has seen its sales and profits nosedive over the past few years. The answer is "No."
In the third quarter, the company had sales totaling 4.18 trillion won, down 16 percent from a year earlier, while posting a 20.2 billion won net loss as it incurred huge losses in its trading business.
Daewoo's disappointing results are largely attributed to the falling price of natural gas produced at its Myanmar field amid the global economic downturn. Its trading business has also been hit hard by sluggish cross-border shipments.
Things will not likely improve for the company in 2016, according to many analysts who expect the global economic slump and falling oil prices to continue to weigh down its bottom line.
Hit hard by its poor performance, the company's share price has plunged more than 50 percent this year.
Early this year, its stock price stood at 32,000 won a share but has since plunged to around 16,000 won. Most brokerage houses here have downgraded the outlook for Daewoo International, prompting investors to dump the stock.
The firm recently shifted its growth strategy toward steel product trading, and oil and gas development will not help lift it out of the slump.
The steel industry has been grappling with a global supply glut caused by overproducing Chinese steelmakers. The outlook for natural resources development continues to remain bleak, given the continued oversupply of crude oil and the economic slowdown in China.
So, changing the company name and the business strategy will not do much for Daewoo International. What it needs to do is regain an entrepreneurial spirit that once existed under former Daewoo Group Chairman Kim Woo-choong.
Rather than relying on the Myanmar natural gas field, which generates most of the company's profit, Daewoo employees should go to Africa, the Middle East, Central Asia and other unexplored regions, as their predecessors did years ago, to find new business opportunities.
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| Kim Young-sang Daewoo International CEO |
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It was unusual for the company to retain its name after being acquired by POSCO, Korea's largest steelmaker, in 2010. Normally in a takeover, the buyer changes the name of the acquired firm to inject its own identity.
But POSCO has allowed the struggling trading and resources development company to keep its name for so long in a bid to appease disgruntled company employees, most of whom yearn for the good old days when the now-defunct Daewoo Group "ruled the world."
With the firm plunging into a slump amid falling commodity prices and sluggish global trade, it has finally decided to be a part of the POSCO family.
To show its affiliation with parent POSCO, the new corporate name will likely include the word "POSCO." Given its need to retain the Daewoo brand, which is well known abroad, Daewoo International will likely be renamed POSCO Daewoo.
The high-profile conflict between former Daewoo CEO Jeon Byeong-eal and POSCO Chairman Kwon Oh-joon in June is also said to have prompted the trading firm, headquartered in Songdo, to alter its corporate title.
At the time, Kwon ordered Jeon to step down, but the latter refused, sparking an unprecedented internal feud. Jeon openly protested POSCO's plan to dispose of its stake in a Myanmar natural gas project. A month later, Jeon was replaced by current CEO Kim.
The question now is whether the new corporate name will provide a boost to Daewoo International, which has seen its sales and profits nosedive over the past few years. The answer is "No."
In the third quarter, the company had sales totaling 4.18 trillion won, down 16 percent from a year earlier, while posting a 20.2 billion won net loss as it incurred huge losses in its trading business.
Daewoo's disappointing results are largely attributed to the falling price of natural gas produced at its Myanmar field amid the global economic downturn. Its trading business has also been hit hard by sluggish cross-border shipments.
Things will not likely improve for the company in 2016, according to many analysts who expect the global economic slump and falling oil prices to continue to weigh down its bottom line.
Hit hard by its poor performance, the company's share price has plunged more than 50 percent this year.
Early this year, its stock price stood at 32,000 won a share but has since plunged to around 16,000 won. Most brokerage houses here have downgraded the outlook for Daewoo International, prompting investors to dump the stock.
The firm recently shifted its growth strategy toward steel product trading, and oil and gas development will not help lift it out of the slump.
The steel industry has been grappling with a global supply glut caused by overproducing Chinese steelmakers. The outlook for natural resources development continues to remain bleak, given the continued oversupply of crude oil and the economic slowdown in China.
So, changing the company name and the business strategy will not do much for Daewoo International. What it needs to do is regain an entrepreneurial spirit that once existed under former Daewoo Group Chairman Kim Woo-choong.
Rather than relying on the Myanmar natural gas field, which generates most of the company's profit, Daewoo employees should go to Africa, the Middle East, Central Asia and other unexplored regions, as their predecessors did years ago, to find new business opportunities.
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