24-1, Jeo-dong 2-ga
Telephone: (02) 2270-5114
Fax: (02) 2275-7040
Incorporated: 1939 as Samkong Fat Limited Co.
Sales: W 1.17 billion (2002)
Stock Exchanges: Seoul
NAIC: 327310 Cement Manufacturing
Ssangyong's corporate philosophy can be summed up as "creating one hundred years of Ssangyong's history." This means that Ssangyong will exist eternally by growing into the world's top-class enterprise and serving the society and humankind through creation. The "one hundred years of history" implies the continuity of the company and "creation" is the basis on which continuity will be secured and constantly requires inventing new products to meet the demands of the society and the times.
1939: Kim Sung Kon and associates establish Samkong Fat Limited, a soap manufacturer.
1962: Ssangyong Cement Industrial Co., Ltd. is founded.
1968: Donghae Plant begins operations.
1973: Ssangyong Cement (Singapore), Ltd. is established.
1975: Ssangyong Research Center is established; founder Kim dies, and son Kim Suk Won is appointed chairman.
1987: Yongpyong Resort, a ski resort, is acquired.
1988: Ssangyong Cement (Pacific) Ltd. begins operations in the United States.
1994: Shanghai Baotailong Concrete Products Co., Ltd. and Shanghai Pulong Concrete Product Co., Ltd. are established in China.
1997: Company undergoes major restructuring.
2000: Yongpyong Resort is spun off; Japan's Taiheiyo Cement Corp. acquires a 29 percent stake in Ssangyong Cement to become the largest shareholder.
2002: Ssangyong Cement (Singapore), Ltd. is spun off.
A member of the Ssangyong conglomerate, Ssangyong Cement Industrial Co., Ltd. is South Korea's leading manufacturer of cement. It offers ready mixed concrete, ceramics, and other products. Ssangyong Cement owns and operates a number of cement plants, including the Donghae Plant, the largest single unit cement plant in the world. The company sells cement domestically and abroad.
Dynamic Leadership in the Early Years: 1930s-50s
The story of Ssangyong dates back to 1939, when the group's founder Kim Sung Kon, along with a few friends, established Samkong Fat Limited, a soap manufacturing company. In the years of great scarcity following the liberation of Korea from 35 years of Japanese administration, this soap became the leading brand. A political idealist, Kim Sung Kon joined Yo Woon-Hyong's National Reconstruction party as top financial officer at 33, thus embarking on one of the most remarkable careers in the modern history of a country known for its uniquely successful mix of government initiative and socially motivated private enterprise.
In 1947 Kim Sung Kon helped found the Koryo Fire and Marine Insurance Co., which he himself took over in 1959 and which eventually developed into a respected subsidiary with assets of US$180.3 million by the late 1980s. It had close ties with such well known insurance brokers and reinsurance companies as Munich Re in Germany and Willis Faber in the United Kingdom, and 150 domestic branches. In 1948 Kim set up the Kumsung Textile Co. with the aim of providing Korea's poverty-ridden people with cotton clothing. The company was successful, despite the scarcity of raw materials and treasury-induced inflation. Kim rebuilt the factory in 1954 after it had been burned down in the Korean War, with the help of the U.N. Korean Reconstruction Agency and turned it into the largest textile firm in the country with 30,000 looms and 250 weaving machines.
Kim's political career, always secondary to his business interests, took off with the military revolution of May 16, 1961, which led to his becoming chairman of the Financial Committee in the assembly under the Democratic Republican Party. His relationship with the military junta under President Park Chung Hee was not servile, since he opposed the latter's scheme to restrict the freedom of the press, in which he had interests, and was later fired for his part in the October 2 Revolt in which members of the cabinet sided with the opposition in order to oust the Home Affairs minister. However, he was ideally placed to implement certain aspects of President Park's first five-year plan to establish the national economy on a more sound basis and increase growth from 1.9 percent in 1953 to 7.1 percent in 1960.
Entering the Cement Market: 1960s-Mid-1970s
In 1962 Kim sold Kumsung Textiles in order to finance a venture into cement, starting with the construction of the world's largest single-unit cement plant at Donghae. Kim did this with the knowledge that two priorities of the five-year plan were production of oil, steel, and cement, in order to build up Korea's independence in strategic industries, and to launch the export drive which had characterized the Korean economy and which was directed actively by successive governments until the 1980s. During the 1980s the trade deficit was turned around, trade barriers and protectionism were dismantled slowly at the insistence of the United States, and new democratic structures were experimented with successfully in government.
Although the plant at Yongwol was dedicated in 1964, it was Donghae, first dedicated in 1968 with 1.7 million tons of production capacity and expanded to 5.6 million tons by 1974 becoming the mainstay and pride of Ssangyong Cement. Situated on limestone reserves calculated to last 200 years and serviced by the port of Pukyong nine miles away, Donghae contributed significantly to the total profits of the group. Donghae's after-tax profits in 1988 of US$54.5 million placed it seventh among Korea's leading companies.
Bolstered by Korea's growing infrastructure and its part in the first and second five-year plans representing a strategic industry, the company grew fast enough for Kim Sung Kon to expand into areas compatible with Ssangyong Cement. In 1967 he took over the Samwha Paper Co.--renamed Ssangyong Paper Co. in 1975--to produce the paper needed to package cement. He also established the Kumsung Shipping Co.--renamed Ssangyong Shipping Co. Ltd. in 1972--to transport his cement along the Korean coast. Kim's Kumsung Industry Co. Ltd., which he had founded in 1954 after the Korean War to export cotton goods, did not fare so well in the 1960s. Renamed Ssangyong Trading Co. Ltd. in 1967 the forerunner of the present Ssangyong Corporation was licensed as a general trading company in 1975 and started trading in earnest in goods unrelated to cement in the 1970s, during the "Miracle of the Han River," as Korea's period of rapid growth was termed.
Following the oil crisis of 1973, Kim established a joint venture with the shah of Iran to set up an oil refinery which would help fuel Kim's cement plants. He planned a major increase in production capacity for Donghae, took over Taehan Cement in 1975, and made moves to enter heavy industry by constructing diesel engines for vessels, generators, and rolling stock. In founding Ssangyong Cement (Singapore) in Singapore in 1973 as a joint venture with a local company, he anticipated later Korean government policy requiring chaebols, family-owned conglomerates, to be more competitive abroad. It was not only the first overseas capital investment by a private Korean firm at a time when foreign exchange was scarce, but it helped to reduce somewhat the reliance on domestic demand and shipments to the Middle East, both of which hit a low from 1980 to 1982. Ssangyong Cement captured a part of the competitive Japanese cartel market as its leading foreign supplier as well as expanding its distribution network there.
Having spent a year with his daughter in the United States after the collapse of his political career, Kim returned to Korea following President Park's "October revitalisation reform" in 1973, a kind of amnesty, resuming the position of chairman of Ssangyong Cement and assuming the presidency of the Korea Chamber of Commerce and Industry. He died of a stroke in 1975, at age 62.
The resulting confusion caused widespread concern, especially to President Park Chung Hee, who declared that the business ought "to be kept well maintained." Shin Hyon Hwack, then president of Ssangyong Cement, held a meeting with presidents of the group's other concerns and followed the wishes of Kim's wife when they appointed her eldest son, at that time not yet 30, as chairman.
New Leadership Bringing Diversification and Growth: Mid 1970s-80s
Kim Sung Kon and his son were opposites in management style, yet Kim Suk Won proved the equal, if not better than his father in expanding the group's fortunes. Total profit increased 26 times between 1975 and 1987, from US$164 million to US$4.2 billion.
Educated at Brandeis University, Kim Suk Won first became auditor for Ssangyong Cement and managing director at Ssangyong Shipping, but after a year of routine desk work, which he disliked, he told his father, "Please let me do anything I like; I want to learn by myself how the world goes. I assure you that I will return home when I reach 35."
He traveled throughout Korea, observing his countrymen's attempts to break away from poverty and low-tech industries. He then built the country's first ski slope at Yongpyeong, convinced that one day the middle classes would want to use it.
Kim Suk Won's first major task on becoming chairman was to complete the two projects his father had left unfinished: oil and cement expansion. The former was an uphill battle. During the 1970s, construction of the refinery proceeded at Onsan, although the National Iranian Oil Co. withdrew from the partnership in 1976, leaving a serious shortage of funds. During the second oil crisis in the early 1980s, cement was also piling up in the depots, and Kim's patience was rewarded when the Iranians supplied his crude oil at almost $3 per barrel below the OPEC price. Then equipped with the nation's largest crude-unloading facilities at Onsan, Ssangyong Oil Refining Co. Ltd. had become a major money earner for the group, with a US$824 million turnover in 1986. It was one of the country's largest oil refiners and was expanding further into petrochemicals, despite increasingly heavy competition and the problem of oversupply which faced all the chaebols as they ignored government warnings to specialize rather than diversify further.
During the 1970s Kim's own strategy was to lead the group away from cement, though never ceasing investment in cement. He had expanded the cement business considerably since taking over. Aware of the value of research and technology, he opened the Ssangyong Research Center in Taedok Science Town in 1975, initially to develop new types of cement and cement-related products, but also branching into ferrite magnet equipment. Most promising was its research into ceramics used in high-precision instruments and engines. It was illustrative of the way in which Ssangyong Cement stood apart from many other Korean companies, which often were plagued with the problem of production and sales outstripping technology and quality. Though production costs for ceramics were high while demand was low, Kim's refusal to hurry beyond capacity coupled with innovative research into new materials meant that with ceramics Ssangyong Cement was well prepared before the new market had even taken off.
Another example of Kim's ability to buck the trend was his longstanding independence of political connections, though with increasing deregulation and domestic unpopularity the loosening of political connections had become inevitable for most chaebols. Despite great pressure and the offer of heavy state subsidies, Kim refused to join the lucrative munitions industry in 1976 and 1977. Even when, as a chaebol, Ssangyong was pushed into concentrating on heavy industry in the same year that Ssangyong Heavy Industries Co. (SHIC) was established after the takeover of a bankrupt firm to manufacture diesel engines and other machinery, Kim managed--after 11 years of losses--to promote this branch as the center of the machine industry, providing some of the expertise needed in the construction of internal combustion engines. The latter was central to his dream of entering the car industry.
SHIC set up Ssangyong Engine Research Institute in May 1989 to develop a new model engine. Its engines were approved by the Classification Society and it was poised to take on the international competition. Other car parts and heavy-duty presses were manufactured by Ssangyong Precision Industry Co., which was equipped with the most advanced technology in Korea. Kim also took over Sunglee Machinery Works Ltd. in 1977 to further support his automobile plans, adding the manufacture of wheel discs to its specialty of weaving machines. He established Sunglee Electronics Co. Ltd. in the same year to produce radio and audio equipment. Kim never attached as much importance to the audio and radio industry as did other chaebols.
In 1980 Kim completed his father's projects, and it marked the end of his own five-year plan: 5.6 million tons of capacity were added to the plant at Donghae and the oil refinery started operating. He went on to expand the paper industry, producing tissue and sanitary paper in conjunction with Scott Paper Co. in the United States in 1979 and sanitary napkins in an agreement with Uni-Charm in Japan, making Ssangyong Paper the best-known paper company in Korea by the late 1980s. He also incorporated Ssangyong Construction Co. Ltd. separately in 1977, rather than firing many trained employees who had worked as an inhouse construction team--at Donghae and Onsan, for instance--as well as constructing postwar rehabilitation projects. From there, the company went on to win contracts in Southeast Asia and the Middle East, including work on a record-breaking project in 1986: the tallest hotel in Singapore, a contract it would not have obtained without Ssangyong Cement Singapore's reputation for reliability. Working closely with Ssangyong Engineering Co. Ltd. (established in 1978) and with the expertise of Namkwang Engineering & Construction Co. Ltd. (established in 1947 and taken over in 1986) Ssangyong Construction Co. continued to expand its interests overseas, notably in a joint venture with the Ralph M. Parsons Group of the United States in 1987 in high-tech construction fields, including nuclear waste plants.
Following the streamlining of Ssangyong Cement operations by emphasizing planning and the use of computers, Kim established in 1981--against the advice of his colleagues--the Ssangyong Software & Data Co., renamed Ssangyong Computer Systems Corporation in 1988, which proved its mettle in designing the management system for the Olympics in Korea in 1988. Kim said he did not want to be left behind in this field.
Kim's most obvious and profitable success story was his agreement in 1983 to buy the ailing securities firm of the Hyosung Group at a time when Korean financial services were relatively undeveloped and the Korean stockmarket rather thin. When the economy boomed in 1986 and the stockmarket was actively promoted by the economic technocrats in government, Ssangyong Investment & Securities Co. was in the right position to reap the reward: a net profit of US$6.9 million in 1986. Under Koh Byung Woo, a former assistant minister of finance, it became a co-manager of the Asian Development Equity Fund and an underwriter of Thai and Brazilian funds, establishing offices in New York, London, and Zürich. With the lifting of restrictions on direct foreign investment in 1992, the company, as one of the big five in Korea, foresaw little difficulty in consolidating its position further. It already operated a highly esteemed investment research institute.
The 1980s were a golden age for the Korean economy, bringing three blessings: cheap dollars, cheap oil, and cheap loans. There were three successive years of 12 percent economic growth starting in 1986 when wages were still low, the exchange rate was favorable, and demand was strong. Once the trade deficit had been turned to surplus, overseas investment became imperative, not least because of rising Korean labor costs and the need to get closer to overseas markets. However, between 1987 and 1990 this trend reversed as Korean exports fell because of high domestic costs, and the 25 percent appreciation of the Korean won relative to the Japanese yen. Although the chaebols were once more favored by the government to boost the slowing economy and credit controls were eased, the gap between price and quality of products remained a problem.
Kim was aware that the only solution lay in improved efficiency, in which his record was good (per capita sales among employees rose eight times from 1975 to 1986); in better technology, a longstanding aim of his; and in more capital intensive production, something which came naturally in his line of business. Unlike Samsung or Daewoo, in the labor-intensive electronics and textiles businesses, respectively, Ssangyong had no great need to find a cheaper source of labor in Thailand or China. At the same time, the overseas networks for most subsidiaries were already well established.
Kim's pursuit of "harmony," "reliability," and "innovation" was perhaps the key reason for the group's steady growth. Not only did he embody a successful move towards second-generation control away from the authoritarian grip of his father, something with which other chaebols still struggled, but the group had an outstanding record in labor disputes. Taking his cue from his stay in the United States, he delegated authority to company presidents, did not rely on elites and encouraged participation of all employees while respecting the authority of juniors, recruited employees from all regions, emphasized the public and social duties of the company, and did not favor nepotism. Only Lee Sung Won, a brother-in-law, and Kim Suk Joon, his youngest brother, were employed by the company, the former as president of Ssangyong Oil Refining Co., Ltd. and the latter as director of Ssangyong Construction. Kim made it clear that he would hand over the reins to whomever was most competent.
Kim also liked to use five-year plans, believing that without long-term planning one would only go downhill, a view borne out by analyses of chaebols less inclined to take a long-term view. In 1976 the group was the first in Korea to introduce a management information system, which resulted immediately in the stabilization of the quality of its cement. This was followed by the Corporate-Identity Program in 1978 and the Corporate-Culture System in 1988 after two years' research by the planning and development office. These were designed to turn Kim's systematic approach and liberal management into part of a corporate culture unique to Ssangyong. The shift in focus towards heavy machinery and high-tech industries was not made without a carefully directed change in the corporate climate to back it.
While Ssangyong continued to produce cement and oil, Kim invested massively in car production since 1986 and intended to promote it as the key business of the 1990s in line with government plans to turn Korea into a net car exporter. He took over Dong-A Motor in 1986, an ailing car manufacturing firm with a deficit of US$5.5 million. In order to produce his X-car, a four-wheel-drive wagon-style jeep, he had to start from scratch, knowing the company would be in the red for at least three years. When the initial X-car prototype was completed, Kim rejected it because its balance was faulty. The purchase of 80 percent equity in the U.K. company Panther provided the necessary technical expertise to perfect the model and also provided an opening into Europe, the intended market for the model. Through Panther, a successful high-class sports car, the Solo II, was built and marketed selectively in various countries. Furthermore, with help from Mercedes Benz and Nissan and its own diesel technology, Ssangyong Motor Company was doing well with special-purpose vehicles, including dump trucks. It had no plans to enter the extremely competitive passenger car market as Korea's fourth car producer until 1991, when the step-by-step approach would have produced the necessary consolidation of expertise, for Kim was well aware that one wrong move could spell trouble for the entire concern. Kim did not believe in grafting foreign technology nor in selling below cost to boost production and sales--illustrated by the fact that although the Ssangyong group ranked sixth in sales, it was in fourth place in terms of profits. Though his more experienced competitors had been saved recently by a surge of domestic demand, the problem of oversupply remained acute.
Major Restructuring and Renewed Focus on Cement: 1990s-2000s
Growth and expansion continued in the early 1990s, and in 1991 Ssangyong Cement built a ferrite magnet plant in Pohang. It also purchased Riverside Cement Co., Ltd. in California. In 1994 two additional Chinese subsidiaries were established: Shanghai Baotailong Concrete Products Co., Ltd. and Shanghai Pulong Concrete Product Co., Ltd. The following year Ssangyong Cement constructed a plant to manufacture fine ceramics.
In the mid-1990s Ssangyong Cement faced a stagnant South Korean economy and slow growth. Though Singapore had been a key growth market for Ssangyong, it, too, was experiencing a slowdown in the construction market, which meant lower demand for Ssangyong's products. In South Korea, the market was expected to expand only 5 percent between 1996 and 2000. In response, Ssangyong Cement aimed to expand in various regions of China, particularly Shanghai, which was undergoing modernization. The company also planned to build a cement plant in Vietnam, where demand for its products was anticipated to grow some 76 percent from 1996 to 2000.
Being involved in so many industries and businesses weighed down Ssangyong considerably, and inefficiency grew. Coupled with the sagging South Korean economy, Ssangyong's debts rose, and by 1997 Ssangyong was in serious financial trouble. The group's debts were estimated to total about W 12 trillion (US$7.5 billion), with Ssangyong Motor accounting for some W 3.4 trillion. Realizing it needed to make significant changes to remain financially viable, Ssangyong implemented a major restructuring. It planned to focus on cement and oil refining as its two main areas of operation and to shed unprofitable businesses. Ssangyong Cement became the Ssangyong Group's anchor unit.
As part of the restructuring effort, in October 1997 Ssangyong not only sold its interest in Ssangyong Paper, but it also shed its stake in a number of other companies, including Ssangyong Motor Co., Ssangyong Heavy Industries, Ssangyong Precision Industry Co., Ssangyong Engineering Co., and others in the insurance, securities, and oil refinery units. In 1998 Riverside Cement was sold to Texas Industries, Inc., and in 1999 Ssangyong Oil Refining Co. was sold to Aramco. In 2000 Ssangyong Cement spun off its resort development unit into a separate entity, Yongpyong Resort Co., then sold half of it to Pan Pacific Resort Investment II for W 100 billion (US$88.4 million).
While Ssangyong worked to right itself financially, cement production continued to grow. In 1999 Ssangyong Cement announced that its cement exports would rise 300 percent compared to 1998 to reach a total of 3.5 million tons. Exports to the United States were expected to increase to one million tons from 1999 to 2002. Ssangyong Cement also aimed to sell 1.3 million tons to Japan and southeast Asia and 1.2 million tons to Europe and Africa by generating new clients.
Despite being the backbone of the Ssangyong Group, Ssangyong Cement was not spared in the group's restructuring, and in May 1998 it was announced that Ssangyong's cement plants were for sale. Ssangyong Group hoped to raised $1 billion through foreign investments by the end of 1998. In 2000 Japan's Taiheiyo Cement Corp. bought a 29 percent stake in Ssangyong Cement, making Taiheiyo the largest shareholder. An agreement to combine forces in cement production and distribution and to share managerial powers was also made. The combined production capacity of the two companies totaled 55 million tons per year, making it the fifth largest cement manufacturer in the world.
In October 2001 the restructuring of Ssangyong Cement's debts was finalized. The company's creditors, which included Chohung Bank and Korea Development Bank, agreed to W 200 billion (US$152.9 million) in new loans and a debt to equity conversion of W 1.7 trillion. The company moved ahead cautiously and was able to make a profit in 2002. For the fiscal year ended December 2002 Ssangyong Cement reported a net profit of W 65.2 million, a significant improvement over the net losses of W 985.8 billion in 2000 and W 462.5 billion in 2001.
In 2002 Ssangyong Cement exited Singapore by selling its stake in Ssangyong Cement (Singapore) Ltd. to Afro-Asia, a shipping company. As Ssangyong Cement had anticipated, the cement market in Singapore had declined. Increasing competition also cut into the Singapore unit's profits.
Ssangyong Cement, though relieved of some financial burden with the 2001 bailout, continued to face many challenges as it journeyed into the mid-2000s. The company was still the largest producer of cement in South Korea--in 2003 it manufactured a quarter of the cement produced in the country--and its cement exports accounted for about half of South Korea's cement exports. In addition to focusing on its core materials of ready-mixed concrete, ferrite magnet, and ceramics, Ssangyong Cement planned to expand into the environmental industry with the development of wastewater disposal systems and recycling options.
Principal Subsidiaries: Shanghai Pulong Concrete Product Co., Ltd. (China); Tianjin Yanlong New Building Material Co., Ltd.; Ssangyong Materials; Shanghai Baotailong Concrete Products Co., Ltd. (China).
Principal Competitors: Hyundai Cement Co.; Asia Cement Mfg. Co.; Hanil Cement Mfg. Co.; Sung Sin Cement Ind. Co.
- "Korea's Ssangyong Cement Lays Foundation to Normalize Operations," Asia Pulse, January 3, 2001.
- Moon Ihlwan, "So Long, Corporate Reform: Ssangyong's Bailout Shows How Seoul Has Lost Its Nerve," Business Week, January 22, 2001, p. 52.
- Schuman, Michael, "Ssangyong Ventures Outside South Korea," Asian Wall Street Journal, September 23, 1996, p. 1.
- South Korea: Financial Times Supplement, May 16, 1990.
- Ssangyong Business Group, Seoul: Ssangyong Cement Industrial Co., Ltd., 1990.
- Ssangyong News, February 1988.
- Suh Hae Sung, "Ssangyong Creditors Approve Bailout," Asian Wall Street Journal, October 8, 2001, p. M11.
- Yoo Cheong-mo, "Ssangyong Group Reborn As Leaner, Healthier Conglomerate," Korea Herald, February 25, 1998.
- ------, "Ssangyong to Raise $1 Billion Through Sales of Key Units," Korea Herald, May 13, 1998.
Source: International Directory of Company Histories, Vol.61. St. James Press, 2004.