Chapter 92: Political Decisions in Crisis

After winning the acquisition battle against Il-seong Group and Jungwoo Group tto take over Ashin Motors, Daehyeon Group faced a liquidity crisis affecting not only Daehyeon Motors but all its subsidiaries due to the costs involved.

“The curse of victory…”

“The acquisition costs aren’t the issue. The expenses for normalization will be astronomical, especially since Ashin Motors, like Daehyeon Motors, has a very strong union.”

I shook my head.

“To secure labor market flexibility as per the IMF’s demands, we need drastic restructuring. But we can’t avoid union backlash.”

At that time, in Korea, the idea of a lifelong job was considered the norm.

Just graduating from university meant companies were eager to recruit you.

It was so common that some companies would hand out envelopes filled with cash to candidates during interviews, urging them not to join rival firms.

However, under the harsh IMF economic regime, the phrase ‘lifelong job’ had vanished.

“I did mention it to Chairman Song, but he probably doesn’t want to miss this opportunity. The choice is ultimately his.”

“What can we do? To Chairman Song, the automobile industry holds special significance.”

“I didn’t think he’d actually listen to you. If Ashin Motors ends up in Il-seong Group or Jungwoo Group’s hands, the title of the top player in the domestic automobile market could be at risk.”

Daehyeon still held the top market share in domestic automobiles, but acquiring Ashin Motors could cause a major upheaval in the market.

It wasn’t just about needing Ashin Motors; it was a strategic choice to maintain our position as the market leader.

“Chairman Song will handle it himself. So what are you planning to do?”

In response to my grandfather’s question, I grinned widely.

“I plan to take over Jungwoo Group.”

My grandfather’s eyes widened in surprise, as if he hadn’t even considered that possibility.

* * *

The new year of 1998 dawned, but the atmosphere was anything but cheerful.

As soon as the year began, the government announced the five principles for corporate restructuring, putting pressure on large corporations to comply with the IMF’s demands.

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

It was a record high, and many citizens lost their jobs in an instant.

KBC Broadcasting began its gold collection campaign.

Citizens scrambled to bring out hidden gold rings and wedding jewelry from their attics to help overcome the foreign exchange crisis.

The government dispatched former Deputy Prime Minister Jeong Yong-in to the U.S. to negotiate short-term foreign debt for Korean companies and banks.

Under JP Morgan’s guidance, they proposed methods used in Latin American countries in the ’80s, but other commercial banks and European banks strongly opposed JP Morgan’s approach.

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

Eventually, in 1998, a meeting of the creditor banks resumed.

Special envoy Jeong Yong-in arrived at JP Morgan’s headquarters.

After listening to explanations of the negotiation proposals from Chairman Douglas and Executive Vice President Ernest, Jeong Yong-in spoke up.

“President Kim Hak-gwon has assured us that he will comply with all the IMF’s requirements. We will reduce overlapping investments and inefficient operations in large corporations, making Korea an attractive investment destination.”

Jeong Yong-in did not hastily accept JP Morgan’s proposal.

He couldn’t take actions that would burden the incoming government during this transitional period, risking his political career.

However, this political maneuver ultimately led Korea into unfavorable conditions for foreign debt negotiations.

Through three days of relentless negotiations, Jeong Yong-in managed to extend the maturity of short-term foreign debts until the end of March by 90 days, but he failed to reach any agreement.

“JP Morgan’s plan doesn’t fit Korea. And since we borrowed the money, why is JP Morgan leading this? We’ll handle it independently.”

Due to the backlash from the commercial banks that had lent significant amounts to Korea, including Citibank and Chase Manhattan Bank, the meetings dragged on with little progress.

“If we accept our proposal, we could reclaim half of the money pooled in Asia. Why is everyone so opposed?”

At Chairman Douglas’s words, JP Morgan executives sighed.

“The amount we lent is relatively small. The economic scale of the country is different from Latin America. Commercial banks don’t want to lose customers after the foreign exchange crisis.”

“Damn, we could make hundreds of millions of dollars! Is there truly no way?”

Key figures, including the JP Morgan chairman, held marathon meetings time and again, but to achieve profits, they needed concessions from other banks, and there were no viable solutions.

Ultimately, the negotiations on Korea’s foreign debt were handed over from JP Morgan to Citibank, the main creditor bank.

Having accurately grasped the atmosphere on Wall Street, Special Envoy Jeong Yong-in called President Kim Hak-gwon to explain the situation.

“Yes, Mr. President. If we leverage the conflicts on Wall Street wisely, we might be able to negotiate on our terms.”

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 has significant influence with Secretary Robert Rubin. They could be of great assistance.”

Go ahead with that, and also mention that Dream High Investment is ready to acquire all the bonds. That will apply strong pressure unless a proper agreement is reached.

“What? Mr. President, has that been discussed with Dream High?”

Boldness is required. If necessary, we need to ask Han Gyeong-yeong for any special favors. Show them that we have this card. I trust Special Envoy Jeong.

“Understood.”

After finishing the call with Kim Hak-gwon, Jeong Yong-in was aware of the power of the new card he held.

While he hadn’t truly grasped it in Korea, he felt its weight in New York.

The influence of Dream High Investment, particularly with its CEO, James Han.

The resumed foreign debt negotiations began at Citibank’s headquarters.

“Here’s what our government proposes: We ask for an extension of the short-term foreign debts maturing in 1998 for a minimum of one year and a maximum of three years.”

Just as objections were about to arise, Jeong Yong-in added:

“If this plan isn’t accepted, we intend to ask James Han of Dream High Investment to purchase all the short-term foreign debts held by financial institutions.”

As soon as James Han’s name was mentioned in the negotiations, creditor banks began to panic. If relations soured with Korea, they could lose significant future clients.

In a bid to take control, the creditor banks, which had been proposing their own plans, ultimately agreed to the Korean government’s proposal.

“Understood. If the Korean government guarantees it, we will extend the maturity.”

With pressure from the White House and the word that James Han was backing the Korean government, negotiations that had been stagnant progressed rapidly.

“We will extend the short-term debts by one to three years. However, the interest rates will be adjusted according to international rates: 1-year at 2.25%, 2-years at 2.5%, and 3-years at 2.75%. Any objections?”

“No, we appreciate your understanding of our government’s position. The Korean government accepts this proposal.”

This dramatically concluded negotiation was immediately announced to the press and communicated to the creditor banks worldwide that had lent money to Korea.

However, for the Korean government, it was merely an extension of short-term debts into the medium term.

The government was well aware that without proper new funding flowing into Korea, there was no future.

Additionally, the short-term foreign debt exceeding 500 million dollars held by large corporations was a significant issue.

Ultimately, President Kim Hak-gwon decided to meet with Han Gyeong-yeong once again.

* * *

I arrived at the hotel where the transition committee was meeting, accompanied by Han Gyeong-yeong, for my appointment with President Kim Hak-gwon.

“Please convey my gratitude to Chairman Cheon. I received reports that the large corporations managed to extinguish their urgent fires thanks to him.”

After exchanging greetings and settling into our seats, President Kim Hak-gwon expressed his thanks to my grandfather.

“Not at all; as a grandfather, I consider it a good deal.”

“What the banks couldn’t achieve, you did. It was a significant help to the national economy.”

“I’m glad to hear it was helpful.”

President Kim let out a sigh as he glanced at me, offering a polite smile.

“I misjudged Chairman Cheon. I thought he was just a ruthless businessman interested in money alone.”

His reaction was definitely different from before.

Next, President Kim’s gaze shifted to Han Gyeong-yeong.

“Boss Han, we need your help. The government has extended the maturity of the short-term debts guaranteed by the state, but the corporations are the real problem. I hope you can invest in them.”

“Hmm…”

Han Gyeong-yeong didn’t respond immediately, pondering over my words.

Perhaps feeling anxious, President Kim spoke up again.

“Ambassador Jung Yong-in, who is currently in the U.S., mentioned your standing there. Right now, no one is willing to invest in Korea. If this continues, not just large corporations but the entire populace might end up on the streets. If you help now, I won’t forget it.”

“President, I’m an investor. I can’t invest based on emotions. While I manage the investments, they must be comprehensible to my clients.”

President Kim nodded solemnly.

“I understand that, but if you commit, others might reconsider. If you help this time, I’ll provide substantial benefits to your company.”

“Understood. I’ll discuss this with my clients and aim to provide a positive response.”

“Thank you.”

Though I didn’t give a firm answer, President Kim seemed relieved by Han Gyeong-yeong’s positive response, leaning back into the sofa with a sigh.

“It’s been over thirty years since I started politics for Korea. It’s disheartening to think I must take responsibility during such a crisis…”

President Kim spoke with a somber expression.

“What do you see as Korea’s future, Boss Han? Can we overcome this crisis and rise again? My advisors only offer vague predictions; please tell me honestly.”

“Mu-hyeok likely knows better than I do. I rely on him for much of my understanding of Korea.”

“Is that so?”

At Han Gyeong-yeong’s words, President Kim turned his gaze toward me.

“I want to hear your thoughts; go ahead.”

“It might be painful to hear.”

“That’s exactly what I want. I hear only what I like from my advisors and bureaucrats—please speak frankly.”

After a moment of hesitation, I finally spoke.

“Korea will likely overcome the IMF crisis faster than other countries. It won’t be solely due to government or corporate efforts, but because the citizens are voluntarily tightening their belts and repaying debts.”

“Ha ha ha, are you only going to say good things?”

“While the sacrifices of the people will help us escape the currency crisis, the benefits will ultimately go to the large corporations.”

“What?”

I gazed at President Kim Hak-gwon, who looked taken aback.

“The labor market, reshaped by the IMF’s demands for restructuring, will require sacrifices from the citizens. The chaebols, revived by public funds and the strength of the people, will grow stronger.”

“Hmm…”

“This is an opportunity to change the corporate landscape. Reviving companies with indiscriminate public funding won’t earn gratitude from them. It’s best to let go of what’s unnecessary and take what’s beneficial.”

“But if the large corporations fail, where will the citizens find jobs?”

I shook my head at President Kim, who looked confused.

“Too big to fail! The amount of tax money poured into saving large corporations has been staggering. Relying on that, they’ve only filled their own pockets and operated inefficiently.”

President Kim couldn’t refute this and fell silent.

“This is the last chance to cut ties with political and economic collusion. What kind of president do you want to be remembered as, President?”

“What kind of president…”

Seeing President Kim’s serious demeanor, I offered a meaningful smile.