The Chaebol Who Flies From Space - Chapter 102



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The Tycoon Who Flies Into Space Episode 102

Episode 102. Ssangyong Motors Acquisition

A big reason for coming to Korea was to visit the oil fields. I have visited the West Sea oil field several times, but this was my first time visiting the South Sea Cheongdo oil field.

We left home early in the morning, arrived in Mokpo, had a light meal at a restaurant that opened early in the morning, and took a helicopter to the drilling ship at the Seohae Oil Field.

As I got off the drilling rig, my body shook as the wind from the spinning propellers blew. Fortunately, the wind blowing from the sea was calm.

I shook hands with Vice President Lee Jeong-bin, who had already prepared and was waiting for me. After looking around the facility, I stopped by the Vice President’s office.

“Thank you for coming such a long way.”

“It’s new here. There are a lot more drilling facilities than before. How many drilling holes have you drilled so far?”

“We have drilled five new ones. If all goes according to plan, we should have five more drilled by the end of the year.”

“So there are 10 additional parts? It is important to work on the target, but we must pay special attention to the safety of the drilling rig. Do you remember that there have been many accidents in the North Sea?”

I repeatedly emphasized safety to Vice President Lee Jeong-bin, whom I met for the first time in a long time. The drilling rig was like a huge powder keg filled with flammable materials.

You never know when or where an accident might occur, and when one does, it can be a huge disaster.

“Of course. The North Sea oil field was in the early stages of offshore oil field development, so there were many problems. Compared to then, we have gained a lot of experience and the working environment has improved a lot.”

“Well, that’s good. Anyway, please pay attention to safety. Even if production decreases, safety comes first. It’s really spectacular to look around the facility.”

The sight of steel structures standing on the sea, diligently pumping out oil, is a tremendous shock to those who see it for the first time.

Director Kim In-young, who accompanied them, confirmed the production volume.

“How much do you produce per day?”

“Production from the West Sea oil field has increased to 1.2 million barrels. If you include the South Sea oil field, the total production is 1.45 million barrels.”

“The production speed of the Namhae Oil Field is slower than expected. Is the work difficult?”

Lee Jeong-bin scratched his forehead at Kim In-young’s question.

“It’s the FPSO’s fault rather than the work speed.”

“I guess it’s not properly equipped yet?”

“Even though WD Chosun said they were rushing, the installation was only completed three days ago, perhaps because there was a backlog of orders.”

FPSO is a large-scale oil storage vessel that stores produced crude oil. It is a special vessel that can only be built by WD Shipbuilding in Korea.

“It’s because Koreans are doing the drilling work that oil production is so fast. If it were in other regions, everyone would have just sat there and waited for the production facilities to be installed. Even the people I work with are all amazed by the crazy production speed. They say they’re trying to make the work process here into a process and apply it to other countries’ workplaces, but I think it’ll be difficult.”

“why?”

“Isn’t the workload different? At the Seohae Oilfield, the employees risked their lives. They said they wanted to see oil self-sufficiency as soon as possible.”

The room became silent at Lee Jeong-bin’s words. What is oil!

“Do government officials visit often?”

“Even without that, Minister of Health and Welfare Jin Seok-young comes to visit us every other day.”

“There will be a lot of interest. Even if this place has somewhat faded from the public’s attention, it is still the lifeline that supports the Korean economy.”

“As international oil prices rise, the government is paying more attention, but honestly, it’s killing me.”

“Now that WTI has risen to $40, the government will be more concerned.”

Whenever international oil prices rise, profits from oil fields skyrocket.

Excluding initial development costs, the average production cost of the West Sea field was $15 per barrel.

The remaining $25 was all profit.

The price of oil that consumers pay includes the base price plus distribution costs. In cases where the oil production site and the refinery are close together, such as the Seohae Oil Field, distribution costs are virtually nonexistent.

Moreover, most of the refined oil produced at the refinery is consumed domestically or exported to nearby China.

The Chinese market was the newly opened El Dorado of the petrochemical industry. As the Daqing oil field, the largest crude oil producing area in China, was gradually drying up, other alternative oil fields were being developed, but they were not enough to meet the rapidly increasing domestic demand.

That’s why Chinese oil companies are desperate to increase their overseas imports.

The nearby West Sea oil field and the South Sea Cheongdo oil field are key areas that cannot be missed. They rushed to sign long-term contracts, but they predicted that oil prices would rise and did not respond.

“Is Sinopec in China still whining about long-term contracts?”

“That’s what they are. They don’t understand each other. They are strictly following your instructions and only signing three-month contracts.”

“You’re doing well. I heard WD Energy has expansion plans?”

WD Energy CEO Park Jeong-gwang, who had been quietly listening to the conversation from one side, explained the refinery to be built in Mokpo.

“The target size of the new refinery is 500,000 barrels per day. We plan to build a naphtha plant here as well.”

“How much money is coming in?”

“The total construction cost, including the land price, is approximately 1.5 billion dollars.”

“Is there an industrial complex of that size in the Mokpo area? I don’t think a factory site of that size will come up.”

“We are developing additional industrial complexes in the Yeongam region. Newly planned oil refineries and chemical plants are planned to be built there one after another.”

“What did they say in Mokpo City?”

“What should we do? We can’t find a factory site the size we want. Instead, we’ve decided to build a WD engine manufacturing plant in Mokpo. Yeongam Industrial Complex is not too far from Mokpo if you commute there.”

“The living environment in Yeongam is not that good, is it?”

“Yes, what is there to see in the countryside? Mokpo, which is nearby, has all the infrastructure, so it’s only a 30-minute drive away, so many people commute. The area where the factory will be built is called Yeongam, but in reality, it’s almost like Mokpo.”

“Mokpo Mayor, you should control your facial expressions from now on?”

“What can I say? My mouth is hanging from my ears. The city’s already poor finances have been greatly improved. The number of young people moving to other regions has also decreased significantly due to the lack of jobs. As the local construction industry picks up, the influx of people from other regions in search of jobs will actually increase.”

“It is certain that the construction industry in the area is picking up after coming here.”

“I wonder if I should buy an apartment here. I heard the apartment prices are already going up.”

It made sense. WD’s factories would create a surge in demand for nearby housing.

During the helicopter ride, I saw several newly constructed buildings.

As expected from Korea, a republic of apartments, it was a construction site for new apartments.

“Any other special reports?”

“We get calls every day asking us to increase our quantity.”

“Where?”

“It seems that Chinese oil companies are running out of raw materials. The materials produced at existing factories are quickly running out. This is the first time I’ve seen business this good.”

“What is the refining margin?”

“It has risen to $10 per barrel. The affiliate imports oil cheaply and sets the export price high, so the margin is high.”

“Aren’t we refining 200,000 barrels a day now? Oh my, that’s huge.”

“It looks like we can pay off all our debt by the end of the year. The problem is the cost of building a new plant.”

“The cost of building a new factory can be solved by increasing capital.”

President Park Jeong-gwang’s face brightened at my instructions.

The company, which was struggling under debt, will have zero debt by the end of the year. With oil prices rising, its revenues will continue to increase in the long term.

“We will complete the new factory as quickly as possible.”

It was President Park Jeong-gwang who was determined.

So, we discussed the current issue for a long time in the office inside the drilling rig.

Starting with an inspection of the West Sea Oil Field, I stayed in Mokpo for a day and toured the factory site where excavation work was being done. The next day, I toured the oil field in Cheongdo, Namhae, and returned to Seoul.

* * *

WD Holdings bought the 43-story building on Teheran-ro and took over the six floors above the 38th floor for its own use.

The number of people working at Holdings has also increased significantly compared to before, reaching 820.

Half of the staff were accounting and audit personnel, and the rest were legal personnel.

WD Investment’s M&A department moved into the Holdings building and worked there. As such, most of Holdings’ staff were currently working on M&A.

Vice President Kim Dong-young, who is preparing the acquisition of Ssangyong Motors behind the scenes on behalf of President Park Young-joo, who is in contact with Chrysler in the United States, reported on the progress.

“The creditors are negotiating with China Geography.”

“What kind of company does Jiri do?”

It was a name I had never heard before.

“Geely is an automobile company founded by Li Shufu from Zhejiang Province. It started out developing refrigerator parts, then made scooters, and recently built an automobile factory and entered the business.”

“I heard it’s not a big company. Do you have the money to acquire it?”

“It seems like they are just trying to get a handle on it. If the acquisition goes through, it will be difficult to raise funds on their own, so it seems like they are going to ask for help from the local government.”

“You mean you’re talking about building an automobile factory in the area you borrowed money from? Sounds plausible. There are over 6,000 people working at the factory in Pyeongtaek.”

Although Ssangyong Motors appears to have a small production scale and low profitability when viewed from Korea, it was an attractive target for a new Chinese automaker.

If they took out the technology to produce finished cars and built factories in their own country, the demand would be huge.

All you had to do was buy it cheap, drain it of all its goodness, and then spit it out.

I didn’t really want to buy it, but when I heard that a Chinese company was rushing to acquire it, I came to my senses.

“What should we do? The bondholder bank said they will proceed with the public offering process.”

“… … Let’s buy it. We were hesitant because the scale was small, but we can’t just let it go to a Chinese company.”

“Since we have been in the black for three consecutive years, the acquisition price seems to be a bit more expensive than expected.”

“How much should I ask for?”

“I think they will ask for at least 500 billion won. If there is a public bidding, most of the competitors will be Chinese companies. In addition to Geely, Shanghai Automotive and Longzheng have expressed their intention to compete for the acquisition.”

The reason they were only interested in acquiring Chinese car companies was obvious.

“Domestic companies probably don’t have confidence in winning the market competition after acquiring Ssangyong Motors?”

“Yes. The domestic market is essentially a monopoly market for modern automobiles.”

Ssangyong Motor’s main vehicle was the SUV. With sales of 3.2 trillion won and a profit of 150 billion won last year, it seemed like it could survive independently, but the biggest problem was that it did not have its own engine technology.

On the contrary, from my point of view, this was better. WD Engine was already developing a new car engine, so if there was an engine that was already under development, it would have to be scrapped.

“All the transmissions in vehicles manufactured by Ssangyong Motors are imported from Toyota, right?”

“Yes. We use the Aisin Mission, and the manufacturer is a subsidiary of Toyota.”

“I guess we need to develop that first.”

I did a test drive once before and found that there were no problems with the engine imported from Benz, but I was not satisfied with the automatic transmission.

“Find a company that can manufacture transmissions domestically. We should establish a subsidiary and produce our own transmissions.”

“Are you going to leave the other parts factories alone?”

“Let’s take a look. After the acquisition, we’ll look into them one by one. If they develop new component technology, let’s either acquire them or acquire shares.”

“Then, should we create an M&A team and put it into operation?”

“Yes… … Wait a minute. I think it would be better to first discuss this with the government.”

The government would also have been wary of automakers being acquired by China.

I called the person in charge right away.