Kukje conglomerate swings back

Last year was a businessman's nightmare in Korea. K. W. Hahn, managing director of the conglomerate Kukje Corporation, describes it as a combination of "every imaginable problem that really was too much to handle."

Depressed markets at home and abroad combined with domestic political and social turmoil left the group with a severe shortage of working capital for much of the year.

Management and labor equally shared the burden of cutting costs, with wages held down to a 20 percent increase (against the 33 percent standard in the late 1970s) and significant improvements in productivity and quality control.

Domestic inflation of 44 percent last year killed off home sales, but the heavy devaluation of the won finally turned things around for the group in the export sector toward the end of the year.

As a result, total sales in 1980 were up 22 percent from the previous years at $1,500 million, of which exports contributed exactly half (an increase of 17 percent).

Kukje began life just before the Korean war as the International Chemical Company (ICC). Its name was changed last year to end the problem of trying to translate the English title into Korean.

It has grown into a group of 22 major companies employing nearly 50,000 people, capitalized at $150million, that now has to be counted in the top five Korean business conglomerates.

Branching out from shoes and textileS, the group is heavily involved in iron and steel products, farm and textile machinery, tires, electronic goods, construction, and transportation.

Kukje is optimistic that this year will see better things across the board.

The group sales target has been set at $2.2 billion, with exports slated to reach $1 billion.

Mr. Hahn predicts major growth in construction, fabrics, and finished garments.

The group is now ranked 15th among the 80-odd Korean companies engaged in Middle East construction. Some $400 million was generated by work in the region last year and by early 1981 Kukje had on hand projects worth another $600 million.

Textiles and shoes were high profit areas until 1975, but the margins have been shaved steadily since then, the managing director says, adding: "We've probably got five to 10 more years of profit left in most textile areas. Taiwan is now the main danger -- in shoes as well -- and in the long term we won't be able to match mainland China on price as our labor costs soar."

as a result, he says, Kukje is not considering expanding its textile facilities from now on, but will invest in new machines to raise quality and added value.

The group's biggest investment over the next two years will be $170 million to expand the capacity of its tire manufacturing plant from the current 1 million to 5 million tires a year.

Some 85 percent of the production is for export, the Southeast Asia and the Middle East key areas for sale s expansion.