[Editorial] Affiliates Step Up, Chip In, to Help Bankrupt Mother Company

Poongjin ID, an interior design enterprise of middle standing, has provided a foothold for comeback with the help of about 240 Small- and Medium-sized suppliers. This company that had gone bankrupt last January received a special court protection from the Seoul Central District Court two days ago, for its partner companies have written-off half of 20 billion won worth of its debt and agreed to convert the balance to investment.

Gwon Young-taek, president of Nature Deco, one of the subcontractors, said, “I have been dealing with Poongjin’s president Jo Nam-jun for eight years and he has never lowered delivery prices or delayed bill payments. To the day he went bankrupt, he was doing his best to pay the debts he owed his suppliers.” Poongjin ID set an example in maintaining transparent partnership. Many suppliers strengthened their managerial foundations since they have been receiving subcontracts under good conditions.

Poongjin ID had been making such efforts to cooperate with its suppliers, but the company went bankrupt because of the management troubles of its local corporation in China. This time, it was the suppliers who stepped up to help the company. They completed subcontract construction work despite the bankruptcy of their mother company, and paid salaries to the employees of Poongjin ID with their own contributions.

At the “Large-Medium-Small Enterprise Cooperation Forum” held under the supervision of President Roh Moo-hyun last May, the business circles agreed to the “Performance Sharing System,” in which companies are to share the profit of cooperation, and to expand support for professional workforces. Samsung, Hyundai Motors and LG promised to make all delivery payments in cash, and to increase support for facilities and technology development. However, the partnership with conglomerates, which small- and medium-sized companies feel, is still in poor condition. Pressured with troubles in workforce, finance, sales, technology, and the stress of lowering supply costs, many small businesses are trying to escape to South East Asia or China. Small- and Medium-sized companies make up 86 percent of employment, 51 percent of production and 40 percent of exports; therefore, their collapse also means the collapse of not only conglomerates but the whole nation.

Such a cooperation model, demonstrated by Poongjin ID and its suppliers, cannot be established in a day. At least for their own good, conglomerates should set an example in confirming a fair partnership. Small businesses should also gain competitiveness themselves to help the conglomerates. The government should promote fair and transparent transactions between large and small companies, and enhance the actual effect of small business saving policies by giving incentives to excellent cases.