Korea targets corruption at automaker Hyundai
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Indeed, the chaebol, with tentacles extending into every key industrial sector and immediate ownership of more than half the country's business assets, may well escape the crisis relatively unscathed.Skip to next paragraph
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The pattern is familiar to analysts who have seen chaebol investigations under every president since Park Chung Hee, the dictator whose allocation of entire spheres of business to one tycoon or another helped the system to grow. Mr. Park, assassinated in 1979, is often credited with leading the rise of the chaebol system.
"They would like to squeeze the chaebol," says Park Nei Hei, a former dean at Sogang University and consultant for Boston Consulting Group. "They'll go after this slush fund at Hyundai Automotive. Then, after a period, they'll let them off."
To Mr. Park, who sits on the board of the Samsung Corp., the trading and construction arm of the Samsung Group, the biggest chaebol, the logic is simple. "They have no choice," he says. "They cannot do anything to the chaebol. They make a fuss. After a while, it's all forgotten."
In the meantime, Hyundai Automotive has had to suspend plans to begin construction of plants in Czechoslovakia and Georgia, while the company, as one executive put it in an interview in the Korea Herald, sails on "like a ship without a rudder."
Hyundai refuses comment other than to express the hope that Chung returns soon "so we can complete these deals."
Rival manufacturers hope the case, at minimum, will deprive Hyundai Automotive of some of the connections that make it difficult for others to compete effectively. "A level playing field is very important for us," says Nick Reilly, chairman of GM Daewoo, acquired by General Motors in 1999. Mr. Reilly doubts, though, if Chung's absence "will have a huge effect."
Indeed, the group's sales this year are forecast to rocket past $100 billion, nearly five times as much as five years ago, while total assets now are just above $60 billion.
Hyundai Automotive and Samsung have come up with "solutions" that they hope will help appease prosecutors. Samsung's chief, Lee Kun Hee, who inherited control from his late father, was accused of manipulating shares through the group's main holding company to guarantee the position of his only son, a managing director at Samsung Electronics.
So far, two Samsung executives have gone to jail. Mr. Lee, though not the immediate target, offered more than $800 million as Samsung's "contribution to society," more than half in scholarship funds. Hyundai Automotive executives, bowing apologetically for the benefit of TV cameras, have promised more than $1 billion, also a "contribution to society."
Mr. Park at Boston Consulting says such responses may help relieve pressure on the chaebol without bringing about real change in the power structure or the system. President Roh Moo Hyun, he notes, said early this year that the chaebol should be more attentive to social welfare. "The atmosphere in this society is turning in that direction," says Mr. Park. "They're not killing the chaebol, but they want them to pay more attention to the people."