LG Revitalized Due to Consecutive Favorable Factors

LG Group who had suffered from the continued unfavorable factors, has lively recuperated thanks to the consecutive favorable factors such as the large-scale inflow of foreign capital, the rise of stock price of the subsidiaries, and the resumption of the IMT-2000 business.

The stock price of the LG subsidiaries had fell down in the aftermath of the aggravated finance at the end of last year. But the stock price of the leading companies such as the LG Electronics and the LG Chemical recovered, and as of the end of May, the total amount of the current prices of the subsidiaries posted the increase of 60 percent from the end of last year. As Koo Bon-Moo, the chairman of LG, has stressed the smooth flow of cash and the profitable management at every opportunity, the overall financial situation has much improved.

According to an official of LG, $1.1 billion will be funded as a follow-up measure of the establishment of the cathode ray tube (CRT) joint corporation with the Philips Co. of Nederland. The LG Electronics will trim down the debt ratio to 150 percent with this fund within this year.

As three chemical companies were successfully divided, and the business performances of the subsidiaries have equally improved, the total amount of the current price of 16 subsidiaries recorded 10 trillion 798.5 billion won, up 60 percent from the end of last year (6 trillion 748 billion won) as of the end of May. Especially, the total amount of the current prices of three chemical companies—LGCI, LG Chemical Ltd., and LG Household and Health Care Ltd.—increased 81 percent after the division, and thus established a scaffold to shift to a holding company system.

As the foreign investors have paid attention to the LG group who was relatively underestimated, the shares of the foreigners increased 45.5 percent in the LG Household and Health Care Ltd., 36 percent in the LG Chemical Ltd., 31 percent in LG Home Shopping, and 26.7 percent in LG Cable Co.. The communication business that had been adrift due to the failure to launch the non-synchronous IMT-2000 business, found the breakthrough with the resumption of the synchronous business.

The CEO of LG group has played a substantial role in improving both internal and external business environment. Chairman Koo has encouraged to concentrate on the Research and Development (R & D) visiting the plants and the research institutes. And he has pushed the presidents of the subsidiaries to attempt at `the communication with the market`. He has actually shown the most lively activity among the leaders of the conglomerates.

The business sector welcomed the resurrection of the LG group who had been in slump due to the domination of Samsung and the rapid advance of SK, for maintaining the balance of the domestic conglomerates. However, it is pointed out that in order

to maintain the rising tendency, LG should enhance the number of the world-best products and should present the leading business for the next generation among the communication, electronics, and chemical.

Park Won-Jae parkwj@donga.com