Daewoo Motors is bankrupt and up for auction, and the union blames Kim, the former chairman of the sprawling conglomerate. Daewoo was South Korea’s second-largest company before getting swamped by debt. A three-man union “arrest squad” flew to Paris early this week to search for Kim. Problem is, nobody knows for sure where he is. The 65-year-old tycoon fled South Korea 17 months ago, just as prosecutors were preparing to charge him with various financial crimes. He’s been seen only a few times since–once at a mansion in Nice, and more recently at a golf course in Florida. Glimpses of Kim living the good life infuriate Daewoo’s workers. “He is responsible for the mess of not only our company, but the whole economy,” Kim Chang Gon, a union leader, told NEWSWEEK. “If we find Kim, we’ll try to forcefully send him to Korea.”
The former Daewoo patriarch is, in some way, the classic fallen hero. Until recently Kim and his company were a huge success story–a symbol of Korea’s dramatic transformation from an impoverished, war-torn economy into a world powerhouse. The chairman’s story is legend. In 1967 Kim started a small trading house in a Seoul back alley with little money and five employees. Thirty years later, Daewoo had grown into a global empire with 320,000 workers in 110 countries. Daewoo made everything from cars and TVs to ships and computers. Renowned for his work ethic, Kim traveled constantly and made Daewoo a major corporate player in China and Russia. To many aspiring youth, he was a revered role model.
Not any more. For starters, Daewoo has proved to be a house of cards. Daewoo was a chaebol, a favored conglomerate nurtured by the South Korean government with contracts and cheap money. Kim built the company through acquisitions, borrowing heavily to buy troubled companies that his management team could not turn around. His strategy of building market share, rather than profits, failed. And he never learned to say no to a deal. Even in 1997, when both Daewoo and the Korean economy were sinking, Kim bought the ailing South Korean automaker Ssang Yong Motors. It was $2 billion in debt.
By 1999 the game was up. Daewoo’s debts totaled $80 billion. To cover the red ink, prosecutors believe Kim conspired to inflate Daewoo’s assets (and reduce its liabilities) by $40 billion–which, if proven, would be the largest bookkeeping fraud in history. Kim is also wanted by prosecutors to answer charges that he kept covert slush funds totaling $20 billion, some of which he allegedly used for personal needs. (Kim has not commented on the charges since leaving the country.) After Daewoo failed to pay its debts in 1999, creditors took over the corporation and put its core units up for sale. Workers at Daewoo Motors say Kim has cost them their future. In an effort to appease General Motors, a potential buyer, nearly 20 percent of the car company’s 10,000 workers were laid off last week. The union has countered that, planning strikes at two major plants this week.
Union workers are hunting for Kim because they don’t believe the government is eager to find him. In the mid-1990s Kim was convicted of bribing state officials for contracts, but his sentence was suspended because of his “economic contributions” to the country. If he is returned and put on trial, there could be more embarrassing revelations about his relationships with government leaders. “We cannot be sure whether politics has been separated from business money,” says Korea University business professor Lee Pil Sang. Seoul has asked its foreign embassies to find Kim, but South Korea doesn’t have repatriation agreements with several countries, including Sudan, where the former Daewoo chief has spent time.
Kim may be a victim of his culture. The South Korean government fostered the notion that massive companies were a good thing. The word Daewoo itself means “big universe.” Watching both his empire and his reputation grow, Kim may have come to believe he was invincible. Just three years ago a group of South Korean business professors heaped praise on Kim in a book, describing him as “a visionary with passion and belief.” The embittered workers at Daewoo Motors have a far different view of their former leader, and they want to tell him what it is–face to face. “We will search the whole world to find and punish him,” says a union leader. Wherever they find Kim, it will be a long way from the top.
