Mr. Fix It’s New Job; Rescuing LG Card Company

Vice Prime Minister Lee Hun-jai: “You have to solve this first”

Park Hae Choon, Seoul Guarantee Insurance President and LG Card President Appointee:

“What do you want me to solve?”

Vice Prime Minister: “LG Card.”

This sums up the telephone conversation between Park and Lee on February 16.

The telephone call from Vice Prime Minister Lee offered encouragement and guidance to LG Card president appointee Park. In November of 1998, Park, who was the president of the Korea Financial Supervisory Commission, was recommended to head the debt-laden Seoul Insurance Guarantee Company by Lee who was also vice prime minister back then.

“When Lee was appointed as vice prime minister again, I expected he would offer me a more decent job,” Park said. “However, within 10 days after his appointment, I took up a very hard task.”

When he became the president of Seoul Guarantee Insurance amid the foreign exchange meltdown grappling the country in 1998, the company was in dire crisis as big corporations of which investment it guaranteed went down en masse. It was to the point that Korea Deposit Insurance Corporation has to inject 10 trillion won into the company.

“I told the staff I would be in my office by 7:00 a.m. and told them to use their discretion,” said Park. His statement made all employee morning persons. He frequently spent nights in his office.

Park launched a strong restructuring drive. He cut the number of outlets in half and laid off 992 out of its regular 1,794 employees. He also cut employee benefits by eliminating company loans for employees and progressive contribution rates for retirement funds.

In June of 1999, he persistently dunned the Samsung Business Group, the parent of the then-defunct Samsung Motor, for debt and received 940.4 billion won. As a result, he turned a deficit of one trillion won in 1998 into a surplus of 322.4 billion won in 1999.

With Park at the helm of LG Card, the normalization plans for the insolvent credit card issuer will change fundamentally. “Korea Development Bank and other creditors will retreat from the forefront and raise funds. Vice Prime Minister Lee and President Park will likely be responsible for the restructuring and sale of LG Card,” said a creditor.

LG Card employees look anxious. “Personnel readjustments would be inevitable to put the company on a normal course,” a LG employee said. “With the appointment of Park as president, I am worrying that the level of the restructuring will be very strong.”

“Risk management is the key to finance. LG Card was oversensitive to changes in the market as it depended on cash advance fees for 80 percent of its income,” Park said. “I will bring a prescription after conducting a survey.”

“Restructuring efforts at Seoul Guarantee Insurance were easy because it was a monopoly. However, it should be remembered that there is intense competition in the credit card industry,” a high official at the Korea Financial Supervisory Commission said. “As far as credit card issuers go, normalizing management is not the panacea.”

Suk-Ho Shin kyle@donga.com