Companies prove survival is possible

¡°When we liquidate a corporation, we should not think about the invested money. If there is a rotten apple in a basket, other apples can rot together.¡± -- Court receiver of Ssang Bang Wool (SBW)

¡°When our company was announced as an exit company, I couldn¡¯t see anything at that time. This year we are making even surplus. I am very happy.¡± -- Ilhwa

Is there any medicine that can be compared with stringent restructuring for a non-performing company? Among the companies under court receivership or court mediation, SBW, Midopa, Ilhwa, Shinwon, Nasan, Woosung Tour, Kwangduk Moolsan, Sammi Steel, Hwasung and others are greeting a somewhat warm year¡¯s end. They share the common experience that they have survived through the restructuring process such as downsizing, expense cutting and business restructuring.

CEO Baek Gap-Jong, who became court receiver last August, thought the SBW was managed in a loose way like other non-performing businesses. SBW advanced into even Korean traditional clothing and T-shirt businesses, as well as its core underwear business.

It also introduced the Yonggari character after paying a huge amount of money, when the movie ¡°Yonggari¡± made by gagman Shim Hyoung-Rae became popular. CEO Baek, however, abandoned theses businesses with huge inventories bravely. He changed directly operated shops to consigned shops and also reduced the number of cooperative firms.

All he did was inevitable to survive, although he felt guilty about those affected. SBW recorded 22 billion won of operating profit this year, after posting only 1.2 billion won last year.

Shinwon, designated as a workout program company in Dec. 1998, downsized by 2,000 employees to 999 employees when it was merging and abolishing its affiliates. Shinwon reduced its 13 clothing brands to five. Shinwon¡¯s turnover and operating profit this year amounted to 520 billion won and 35 billion won respectively, increasing by 24 percent and 67 percent each compared to last year.

Nasan, placed in court receivership in July 1998, made 205 billion won worth of sales, and its operating profit is forecast to exceed 400 million won.

Ilhwa is a typical business that survived a near-death experience. Ilhwa, which once frightened Coca Cola with a Macol myth, was named as an exit company in June 1998. Ilhwa reduced its employees from 1,000 to 450 and retained only 40 products out of 68 food and pharmaceutical goods it had produced. All the employees made their starting time from 8:30 to 7:30 a.m. voluntarily. The company went under court receivership last January exceptionally as an exit company, and accomplished ordinary profit surplus amounting to 2 billion won this year.

Midopa Department Store, godfather of the Korean distribution industry, is also taking its past glory back. Midopa focused its business capability on some branch department stores, including Sanggye Department Store, and transformed even their cultural space to shopping floor. The department store downsized the number of its employees from 1,133 to 664 and sold real estates regardless of the market trend.

Midopa is forecast to make 31.4 billion won worth of operating profit this year. Woosung Tour, Kwangduk Mulsan and Sammi Steel together with SBW and Midopa were awarded outstanding court receiver prize from the court recently due to well performed restructuring.

Ha Im-Suk artemes@donga.com