Free Web NovelThe winner’s curse.
Daehyeon Group would win the bidding war against Ilseong and Joongwoo to acquire Ashin Motors, but the cost of the acquisition would push the entire group—not just Daehyeon Motors—into a severe liquidity crisis.
“The winner’s curse, huh...”
“It’s not just the acquisition cost. The cost of normalizing the company will be astronomical. Especially since Ashin Motors, like Daehyeon Motors, has an extremely powerful labor union.”
I shook my head. frёewebηovel.cѳm
“To secure labor market flexibility as the IMF demands, you’ll need to enforce massive restructuring, and that will inevitably provoke strong union resistance.”
This was still a time when the term “lifetime employment” was taken for granted in South Korea.
A time when simply graduating from university meant companies competed to recruit you.
There was even an era when interviewers handed out envelopes of cash, begging candidates not to take jobs elsewhere.
But under the harsh IMF economic regime, “lifetime employment” had become a thing of the past.
“I already told Chairman Song, but he likely won’t want to miss this opportunity. In the end, it’s his choice.”
“Tsk, what can you do? For Chairman Song, cars are something special.”
“Yes. I never expected him to listen to me anyway. If Ashin Motors ended up in Ilseong or Joongwoo’s hands, Daehyeon’s position as the number one carmaker in the domestic market could be threatened.”
Daehyeon already held the top market share, but acquiring Ashin Motors would cause {N•o•v•e•l•i•g•h•t} a huge upheaval in the domestic automotive market.
It wasn’t about needing Ashin Motors—it was about protecting the number one spot.
“Song will do what he wants. So, what about you? What are you planning now?”
At Grandfather’s question, I smiled broadly.
“I’m planning to take over Joongwoo Group.”
Grandfather’s eyes widened, clearly surprised.
It was something even he hadn’t considered.
* * *
The new year of 1998 had dawned, but the mood was anything but bright.
Following IMF demands, the government immediately announced the Five Principles of Corporate Restructuring, putting heavy pressure on conglomerates.
In Seoul alone, over a hundred companies were being declared bankrupt daily.
Unemployment hit record levels, with countless people losing their jobs overnight.
KBC launched its gold-collecting campaign.
People voluntarily brought in hidden wedding rings, family heirlooms, and old jewelry, trying to help the country overcome the foreign currency crisis.
The government sent former Deputy Prime Minister Jeong Yongin to the U.S. to negotiate short-term foreign debt with Korean corporations and banks.
JP Morgan proposed methods they had used in South American countries in the 1980s, but other commercial banks and European banks strongly opposed the plan, arguing Korea was a completely different case.
In the end, by 1998, the creditors’ meeting was reconvened.
Jeong Yongin visited JP Morgan’s headquarters.
After hearing Chairman Douglas and Executive Director Ernest explain their proposal, Jeong opened his mouth.
“President-elect Kim Hakgwon has promised to implement every condition the IMF demands. Through restructuring, we will reduce redundant investments and reckless spending by conglomerates, making Korea a more investment-friendly country.”
But Jeong Yongin didn’t rashly accept JP Morgan’s proposal.
During this transitional period, he couldn’t risk his political future by burdening the incoming administration.
This political calculation, however, led Korea to negotiate its foreign debt under unfavorable conditions.
After three days of grueling negotiations, Jeong managed to extend the short-term debt maturity by 90 days, until the end of March, but no final agreement was reached.
“JP Morgan’s plan doesn’t suit Korea. And why should JP Morgan lead the process when we’re the ones who borrowed the money? We will negotiate independently.”
The commercial banks that had lent Korea the most money, such as Citibank and Chase Manhattan, opposed JP Morgan’s approach, stalling the talks.
“If they accepted our proposal, we could recover half the money tied up in Asia. Why are they so against it?”
Douglas scowled, and JP Morgan’s executives sighed.
“Because we didn’t lend them much money. This isn’t South America. The economy is on a completely different scale. Commercial banks don’t want to lose their future customers after the crisis.”
“Damn it. There are hundreds of millions of dollars in profit on the line. Isn’t there any way?”
Despite marathon meetings, JP Morgan couldn’t find a solution without concessions from other banks.
Eventually, the Korean debt negotiations shifted from JP Morgan to Citibank, the lead creditor.
Sensing the changing mood on Wall Street, Jeong Yongin called President-elect Kim Hakgwon to explain the situation.
“Yes, Mr. President-elect. If we properly exploit the rift among Wall Street players, we might get the terms we want.”
— Do you have a plan?
“We should appoint Goldman Sachs and Salomon Smith Barney as advisory firms to support us indirectly. Goldman Sachs, in particular, can exert significant influence on Treasury Secretary Robert Rubin. It could be a huge help.”
— Proceed with that. And tell them Dreamhigh Investment is ready to purchase all the short-term debt if no agreement is reached. That should put real pressure on them.
“Sir? Is that... already confirmed with Dreamhigh?”
— We need to show backbone. If all else fails, we’ll ask Han Kyungyeong for help, even with special incentives. Show them we have this card. I trust you, Jeong.
“Understood.”
After hanging up, Jeong Yongin felt the weight of the weapon now in his hands.
He hadn’t realized it back in Korea, but in New York, he understood Dreamhigh Investment’s reputation—and the power of its CEO, James Han.
The renewed negotiations began at Citibank headquarters.
“Our government proposes the following: please extend the maturity of short-term debts due in 1998 for at least one year and up to three years.”
As murmurs of dissent rose, Jeong added:
“If this proposal isn’t accepted, we will request that James Han of Dreamhigh Investment purchase all short-term debts held by financial institutions.”
At the mention of James Han’s name, the creditors grew restless.
Falling out with Korea now could cost them a major future client.
The banks, which had been vying for control with conflicting proposals, ultimately accepted Korea’s terms.
“Very well. With the Korean government’s guarantee, we will extend the maturities.”
Under pressure from the White House and the knowledge that James Han was backing Korea, the negotiations concluded swiftly.
“We will extend the short-term debts for one to three years. The interest rates will be based on international rates plus a premium: 2.25% for one year, 2.5% for two years, and 2.75% for three years. Any objections?”
“No. Thank you for understanding Korea’s position. The Korean government accepts these terms.”
The agreement was immediately announced to the media and communicated to creditor banks worldwide.
But in reality, Korea had merely extended its short-term debt into medium-term debt.
The government knew that without fresh capital flowing into Korea, the future remained bleak.
There was also the problem of over 50 billion dollars in short-term corporate debt.
President-elect Kim Hakgwon arranged another meeting with Han Kyungyeong.
* * *
I arrived at the hotel where the transition team was based, accompanied by Han Kyungyeong.
We had an appointment with President-elect Kim Hakgwon.
“Please thank Chairman Cheon for me. I’ve heard reports that his help allowed the conglomerates to avert disaster.”
As soon as we sat down, Kim Hakgwon expressed his gratitude to Grandfather.
“Not at all. Grandfather said it was a good deal for him as well.”
“Even the banks couldn’t manage this. It’s been a great help to the national economy.”
“I’m glad it helped.”
Kim Hakgwon sighed as he looked at me.
“I misjudged Chairman Cheon. I thought he was just a ruthless loan shark.”
His attitude was clearly different now.
Then his gaze turned to Han Kyungyeong.
“Mr. Han, we need your help. The government guaranteed the extension of short-term debts for financial institutions, but companies are the problem. We’d like you to invest.”
“Hmm...”
Han Kyungyeong didn’t answer right away, just as I had instructed.
Impatient, Kim Hakgwon pressed again.
“Special Envoy Jeong told me about your reputation in the U.S. Nobody wants to invest in Korea right now. At this rate, not just conglomerates but ordinary citizens will be out on the streets. If you help us now, we won’t forget.”
“Mr. President-elect, I’m an investor. I can’t make investments based on sentiment. Even though I manage the funds, my clients must see it as a sound investment.”
Kim Hakgwon nodded heavily.
“I understand. But if you agree, they’ll consider it. Help us now, and my administration will give your company many advantages.”
“I understand. I’ll discuss it with my clients and do my best to give you a positive answer.” freёwebnovel.com
“Thank you.”
Though he hadn’t received a definitive answer, Kim Hakgwon let out a sigh of relief, leaning back in the sofa.
“I’ve been in politics for over thirty years for Korea’s sake. But having to shoulder the country’s future in a crisis like this... it’s painful.”
With a grim expression, Kim Hakgwon turned to us.
“Mr. Han, what do you think of Korea’s future? Can we overcome this crisis? My aides only give me vague reassurances. I want honesty.”
“Mr. President-elect, Muhyuk knows Korea better than I do. I’ve relied on his advice a lot.”
“Really?”
At Han Kyungyeong’s words, Kim Hakgwon looked at me.
“I want your thoughts. Tell me.”
“You may find it painful.”
“That’s exactly what I want. My aides and officials only tell me what I want to hear. I want the truth.”
After a brief hesitation, I spoke.
“Korea will overcome the IMF crisis faster than other countries. Not because of the government or the corporations, but because the people will tighten their belts and repay the debt themselves.”
“Ha-ha-ha. So you are going to tell me what I want to hear?”
“Korea will escape the crisis thanks to the people’s sacrifice... but the conglomerates will reap the rewards.”
“What?”
I looked at him steadily.
“As the IMF demands, restructuring will change the labor market, forcing citizens to bear the burden. And the conglomerates revived by public funds and the people’s sacrifice will only grow stronger.”
“Hmm...”
“This is your chance to reform the corporate sector. Pouring public funds indiscriminately into saving companies will only make them ungrateful. Cut what needs to be cut, keep only what’s worth saving.”
“But if the conglomerates collapse, where will the people work?”
I shook my head.
“Too big to fail. The government has poured enormous tax money into saving conglomerates. They’ve grown complacent and reckless because they believed they’d always be saved.”
Kim Hakgwon couldn’t refute that and stayed silent.
“This is your last chance—to cut the ties between politics and business. How do you want to be remembered in history, Mr. President-elect?”
“What kind of president, huh...”
As Kim Hakgwon sat there with a serious expression, I smiled faintly.
< You May Find It Painful > End
