Chapter 92

< You may feel unwell. >

You may feel unwell.

The winner's curse.

Although Daehyun Group won the acquisition battle against Ilseong Group and Jungwoo Group and acquired Ashin Motors, they ultimately faced a liquidity crisis not only for Daehyun Motors but for all their subsidiaries due to the cost.

“Winner's curse...”

“The acquisition cost is not the problem. The cost to normalize operations will be enormous. Especially, Ashin Motors has a very strong labor union, just like Daehyun Motors.”

I shook my head.

“To secure the flexibility of the labor market as required by the IMF, we will have to implement strong restructuring measures, which will inevitably provoke resistance from the labor unions.”

At that time, South Korea was an era where the concept of a lifelong job was taken for granted.

It was a time when, as soon as you graduated from college, companies would vie to hire you.

It was such a time that people would even give interviewees envelopes of money to encourage them to join their company instead of others.

However, under the harsh IMF economic system, the concept of a lifelong job disappeared.

“Chairman Song probably doesn’t want to miss this opportunity. After all, he has to make his own choice.”

“Tsk, what can we do. Cars are a special existence to Chairman Song.”

“Yes, I didn’t think he would listen to my advice. If Ashin Motors were to be acquired by Ilseong Group or Jungwoo Group, the title of the top domestic car manufacturer could be at risk.”

Daehyun is still the top domestic car manufacturer, but if they were to acquire Ashin Motors, they could cause a major upheaval in the domestic car market.

It was more of a choice to maintain their position as the top domestic car manufacturer rather than a necessity to acquire Ashin Motors.

“Chairman Song will make his own decision. So, what do you plan to do now?”

In response to my grandfather’s question, I smiled broadly and answered.

“I plan to acquire Jungwoo Group.”

My grandfather’s eyes widened, as if he hadn’t anticipated this.

* * *

The new year of 1998 dawned, but the atmosphere was not bright.

The government, in line with the IMF’s demands, began pressuring large corporations by announcing the five principles of corporate restructuring as soon as the new year started.

In Seoul alone, over 100 companies went bankrupt in a single day.

Many citizens lost their jobs in an instant, recording the highest number in history.

KBC Broadcasting Corporation launched a gold collection campaign.

Citizens voluntarily brought out their hidden rings and wedding jewelry to help overcome the foreign exchange crisis.

The government dispatched former Vice President Jeong Yong-in to the United States to negotiate short-term foreign debt.

Under the leadership of JP Morgan, they proposed a method similar to what was done in Latin American countries in the 1980s, but other commercial banks and European banks strongly opposed it.

The reason was that South Korea was a completely different case from Latin American countries.

In the end, the creditor bank meeting was resumed in 1998.

Special Envoy Jeong Yong-in visited the headquarters of JP Morgan.

After listening to the explanation from Chairman Douglas and Executive Vice President Ernest, Special Envoy Jeong Yong-in spoke.

“Mr. Kim Hak-gwon, the elected president, has stated that he will fully comply with the conditions demanded by the IMF. We will reduce the overlapping investments and inefficient operations of large corporations through restructuring, making Korea a more attractive country for investment.”

Special Envoy Jeong Yong-in did not hastily accept the proposal from JP Morgan.

He couldn’t shorten his political life by taking actions that would burden the next administration during the transition period.

However, this political move ultimately became the reason South Korea had to negotiate under unfavorable conditions.

Special Envoy Jeong Yong-in managed to extend the maturity of short-term foreign debt by 90 days until the end of March after three days of tough negotiations, but no agreement was reached.

“JP Morgan’s proposal is not suitable for Korea. And why should JP Morgan lead when the money was lent by us? We will handle it independently.”

Due to the opposition from commercial banks like Citibank and Chase Manhattan, which had lent a lot of money to South Korea, the meeting dragged on.

“Why do they all oppose it so much? If we accept our proposal, we can recover half of the money that has flooded into Asia.”

The executives of JP Morgan sighed at Chairman Douglas’s words.

“Because we didn’t lend much money. It’s different from Latin America. The scale of the national economy is also different. Commercial banks don’t want to lose their customers after the foreign exchange crisis.”

“Damn. We could secure billions of dollars in profit. Is there no way?”

The core members, including the chairman of JP Morgan, held marathon meetings, but ultimately, they needed the concessions of other banks to see a profit. There was no solution.

In the end, the lead bank for the Korean foreign debt negotiations shifted from JP Morgan to Citibank.

Special Envoy Jeong Yong-in, who had a good grasp of the situation on Wall Street, called Mr. Kim Hak-gwon to explain the circumstances.

“Yes, Mr. Kim. If we can properly utilize the conflicts on Wall Street, we can continue the negotiations as we wish.”

— Is there a way?

“We need to appoint Goldman Sachs and Salomon Smith Barney as advisory firms to support us from the outside. Especially, Goldman Sachs can exert significant influence through Minister Robert Rubin. It will be very helpful.”

— Proceed with that. Also, mention that Dream High Investment can acquire all the short-term foreign debt if there is no proper agreement. It will put strong pressure on them.

“Yes, Mr. Kim. That’s... something you’ve discussed with Dream High?”

— We need to show that we have such a card. If it’s impossible, we have to ask Han Kyung-eok for help, even if we offer special privileges. I trust you, Special Envoy Jeong.

“Understood.”

After ending the call with Mr. Kim Hak-gwon, Special Envoy Jeong Yong-in knew the power of the new knife he had been given.

He didn’t fully understand it while in Korea, but he felt it in New York.

The status of Dream High Investment and the name of its CEO, James Han.

The reopened foreign debt negotiations began at the headquarters of Citibank.

“Our government proposes the following: we request that the maturity of short-term foreign debt due in 1998 be extended for a minimum of one year and a maximum of three years.”

Just as the opposition was about to arise, Jeong Yong-in added:

“If this proposal is not accepted, we will ask James Han of Dream High Investment to purchase all the short-term foreign debt held by financial institutions.”

When James Han’s name was mentioned in the foreign debt negotiation room, the creditor banks began to feel anxious. If relations with South Korea soured, they could lose a major customer in the future.

In an attempt to regain control, the creditor banks ultimately accepted the South Korean government’s proposal.

“Understood. If the South Korean government provides a guarantee, we will extend the maturity.”

The negotiations, which had been dragging on due to pressure from the White House and the mention of James Han supporting the South Korean government, proceeded swiftly.

“We will extend the maturity of short-term foreign debt from one to three years. In return, we will apply a premium interest rate proportional to the international interest rate: 2.25% for one year, 2.5% for two years, and 2.75% for three years. Any objections?”

“No. We appreciate your understanding of our government’s position. The South Korean government will accept this proposal.”

The dramatic resolution of this negotiation was immediately announced to the media and communicated to the creditor banks in various countries around the world.

However, for the South Korean government, this merely extended the short-term foreign debt to medium and long-term.

The government was well aware that there was no future unless proper new funds flowed into South Korea.

The short-term foreign debt of over $5 billion held by large corporations was also a problem.

In the end, Mr. Kim Hak-gwon, the elected president, decided to meet with Han Kyung-eok again.

* * *

I arrived at the hotel where the transition committee was located with Han Kyung-eok. It was an appointment with Mr. Kim Hak-gwon.

“I want you to convey my gratitude to Chairman Cheon. Thanks to him, I received a report that large corporations were able to put out the urgent fire.”

As soon as I greeted and sat down, Mr. Kim Hak-gwon thanked my grandfather.

“No, he said it was a good deal for him as well.”

“It’s something the banks couldn’t do. It was a great help to the national economy.”

“I’m glad it helped.”

With a formal smile, I faced Mr. Kim Hak-gwon, who sighed.

“I misunderstood Chairman Cheon. I thought he was just a ruthless person who only played with money.”

Indeed, it was a different reaction from before.

Next, Mr. Kim Hak-gwon’s gaze turned to Han Kyung-eok.

“Mr. Han, I need your help. We have extended the maturity of short-term foreign debt held by financial institutions with the government’s guarantee, but the problem lies with the corporations. I hope you can invest in them.”

“Hmm...”

Han Kyung-eok did not answer immediately, as I had suggested.

Seeing Han Kyung-eok’s thoughtful expression, Mr. Kim Hak-gwon, who seemed anxious, spoke again.

“Special Envoy Jeong Yong-in, who is in the United States, told me about your status there. There are no people willing to invest in South Korea now. If this continues, not only large corporations but also the citizens might end up on the streets. If you help us now, I won’t forget it.”

“I am an investor. I cannot invest based on sentiment. While I manage the funds, the investments must be understandable to my clients.”

Mr. Kim Hak-gwon nodded heavily.

“I understand. But if you agree to do it, they will consider it. If you help us this time, I will give many benefits to your company.”

“Understood. I will have a conversation with my clients and try to give a positive response.”

“Thank you.”

Although he didn’t get a definite answer, Mr. Kim Hak-gwon seemed relieved and leaned back on the sofa with a sigh.

“I’ve been in politics for over 30 years to serve South Korea. It’s sad that I have to take responsibility for such a crisis. Sigh...”

Mr. Kim Hak-gwon spoke with a dark expression.

“Mr. Han, what do you think about South Korea’s future? Can we overcome this crisis and rise again? My advisors and bureaucrats only give vague answers. I want you to speak honestly.”

“I think Mu-hyuk knows better. I have received a lot of help from Mu-hyuk regarding Korea.”

“Is that so?”

Hearing Han Kyung-eok’s words, Mr. Kim Hak-gwon turned his gaze to me.

“I want to hear your thoughts. Speak up.”

“You may feel unwell.”

“I want to hear that. I always hear what I want to hear from my advisors and bureaucrats. Speak honestly.”

After a moment of thought, I finally spoke.

“Korea can overcome the IMF crisis faster than other countries. It won’t be because the government or the corporations did well. The citizens will voluntarily tighten their belts and work to pay off the debt.”

“Ha ha ha. Are you going to say only good things?”

“While we will overcome the foreign exchange crisis through the sacrifices of the citizens... the fruits of this will be eaten by the large corporations.”

“What?”

I stared at Mr. Kim Hak-gwon, who seemed surprised.

“The employment market, which will change due to the IMF’s demands for restructuring, will require sacrifices from the citizens. The power of the chaebols, who will be revived with public funds and the strength of the citizens, will become stronger.”

“Hmm...”

“This is the last chance. The last chance to break the ties between politics and business. What kind of president do you want to be remembered as, Mr. Kim?”

“What kind of president...”

Seeing the serious expression of Mr. Kim Hak-gwon, I smiled meaningfully.

< You may feel unwell. > End