Turnaround at LS Cable

Profit jumps from 2004 due to reform effort led by Vice Chairman Koo

LS Cable Co., former LG Cable, posted annual sales of 1.84 trillion on in 1999 and the annual figure grew about 5 percent every year until 2004. In 2004, however, its annual sales jumped to 2.43 trillion won and to 2.9 trillion won last year. The company produces a full range of products including electric wire, light communication wire, and industrial machinery, among others.
What has been the reason for such dramatic jump in sales's People began to wonder. The answer was not too far away. Company officials realized the drastic change in the company's operation developed with the arrival of Vice Chairman Koo Cha-yeol as its CEO early in 2004.
Vice Chairman Koo is the oldest son of Koo Pyong-hoe, fourth younger brother of late group founder Koo In-hoe and now honorary chairman of the E1 Co., He joined the Lucky-Goldstar International in 1978 as a clerk and worked his way up while with LG Securities and LG Investment Securities before being assigned to LG Cable in 2004 as vice chairman and CEO.
Those officials remembered that the new CEO has always called for 'innovative management'after he took over management of the company so much so that he is known as the 'innovation missionary.'His name cards bear the inscription, 'no innovation, no future' showing how engrossed the new CEO is with innovative changes to move ahead.
During his recent interview with media at his office in the ASEM Tower in southern Seoul, the vice chairman said the nagging problem for the company was the memory of the failure that fell on a rival company. The company built and operated a plant in China in the early 1990s and chucked the operation and withdrew in less than 10 years. LS Cable officials could not see their company meeting the same fate by setting up operations in China and making daring investments in China. They didn't realize that China's market has been growing and regulations have been eased during the time. Vice Chairman Koo said the company built four plants in China and has been operating them without a hitch. He had to persuade company officials to make the move. Koo said they became fearful and had doubts about the project. They didn't want to be held responsible for the failure and put in jeopardy their jobs with the company. They thought they wouldn't have anything to lose if they stayed inactive and shied away from being bold and daring, the vice chairman recalled.
He had to change personnel regulations to hand them a jolt. The regulations stipulated that they can be promoted to the level of managers until they are 50 years old, not directors and those managers didn't attempt to do anything for the company except routine ones, knowing that they have reached the top as far as promotion was concerned.
Koo said he had done away with the old regulation and made a manager a director shocking every employee of the company to tell them that the personnel regulations have been changed and they can work passed 50 years of age and if they work hard as a manager, they can be promoted to directors. The move was the first of reform that Koo had in mind when he took over the company.
The vice chairman said initiative is at the center of the discussions on reform to make company officials and staff put out initiative ideas. He thought he had to make them high spirited and as the first step, he thought he had to relax them while in office, by making management less authoritarian. Management, he thought should listen to people under them even if they are no help to them.
"I don't talk much at meetings, but make decisions on directions that the company should take at the end of the meetings,"the vice chairman said.
He said small company owners feel the inheritance tax is too heavy more so than large company owners. He said he is afraid that they will try to sell their companies to foreign buyers at high prices, because the move is tantamount to the loss of national wealth. Third or fourth generation owners are susceptible to the temptation, he is afraid. In fact, he said he tries to approach them when he looks out for M&A targets because they are easy to deal with.
Vice chairman Koo said the company has been building plants in China and Vietnam so far, but he thinks it is about time to move R&D facilities to foreign countries this year, including Tokyo, Wuxi and Qingdao, China. nw

LS Cable Vice Chairman Koo Cha-yeol.