“Welcome, Director.”
Despite his urgent schedule, Asan Motors readily agreed to meet with me. The key executives, even Chairman Choi Seongjin himself, came out to welcome me.
With terribly tense expressions.
In truth, I knew why they were frozen stiff, as if the division commander had come to visit today.
Roughly ten years ago, the sluggish KOSPI had been a thorny issue for academia, the government, and the public alike.
After much deliberation, the government at the time concluded that the cause of the discount was most likely corporate retained earnings, and ultimately drafted a bill called the Retained Earnings Prohibition Act(?). It was an extremely shareholder-friendly bill that imposed massive taxes if companies failed to use profits above a certain threshold for research, development, or dividends.
Of course, Korean companies are not the sort of beings who promptly obey just because a law is passed. Once the law was made, what was needed next were the hired thugs who would barge into their living rooms and smash their TVs.
That was the pension fund.
After the Retained Earnings Prohibition Act, the pension fund steadily glared at them and pushed dividends upward. Through every sort of pressure, it forced them to increase R&D spending.
But the conglomerates still alive today are all companies that experienced the IMF crisis… They know all too well what happens when an industry falls into recession, or when there is no cash liquidity during a downturn.
In the end, for one reason or another, the Retained Earnings Prohibition Act was not properly observed. Still, in the sense that it gave the chaebol a sense of vigilance, perhaps it had meaning.
“…Director. I can explain everything.”
But just because it had become a dead letter did not mean the law had disappeared.
Recently, Asan Motors had steadily increased its retained earnings, reaching 100 trillion won, nearly the highest level among major conglomerates. Because of that, resentment among shareholders was piercing the heavens.
Hoam Electronics, whose market capitalization was roughly six times larger, had a similar level of retained earnings, so it would have been stranger if Asan hadn’t been cursed out.
“It seems you know why I’m here.”
“…”
“Could I speak with you alone for a moment, Chairman?”
At his glance, the executives left the conference room with pale faces.
In truth, I had not come today to urge him to pay dividends. But as someone representing the pension fund, I could not completely ignore shareholder returns, so an overbearing attitude was unavoidable.
“Chairman. I understand Asan Motors’ retained earnings recently surpassed 100 trillion won. Your sales performance has also been good, and you’ve maintained third place in global market share for three consecutive years, correct?”
“Yes…”
“I’d like to hear a detailed explanation for why such an Asan Motors decided to pay no dividends for two years in a row.”
“That is…”
“If the reason is not convincing, then as a major shareholder, we will have no choice but to actively raise our voice. If you do not pay dividends, then under the retained earnings taxation law, you will have no choice but to pay an enormous amount in taxes.”
The reason I pressured him like this was because I truly wanted to know what he was thinking.
Among the third-generation chaebol heirs currently in power, he was one of the very few heads whose management ability was recognized. But in the future I knew, Asan Motors, squeezed by America’s subsidies and China’s labor costs, eventually lost its market share wholesale and was acquired by BYD.
I was curious. Had he not prepared at all? Or had he fought with everything he had, only to hit the limits imposed by the weight class of his country?
“…It’s impossible.”
His troubled expression lasted only a moment. Once money entered the conversation, his face became extremely resolute.
“Though we are currently third in global market share, we do not trust that metric. Whether it takes ten years or twenty, the era of electric vehicles will come. But in terms of that technology, we are scraping the bottom.”
“Then rather than piling up retained earnings, wouldn’t it be better to invest in R&D?”
“It’s embarrassing to say, but what we are doing now is already at that level. We have increased EV R&D by thirty percent every year. But money does not solve everything. Capable master’s and doctoral graduates receive high-salary offers from the United States and leave Korea. We, too, are increasing research spending every year to attract talent, but… honestly, it is difficult to beat the U.S. and China when they have their governments’ support behind them.”
He normally did not reveal his emotions easily, but he even raised his voice as he poured out his grievances to me.
In truth, I understood his hardship very well. And I also knew that the sense of crisis he felt now would soon become reality.
2035. Europe’s original goal of banning production of internal combustion vehicles had fallen through, but instead, the era of EV subsidies ended and the era of internal combustion vehicle penalties—environmental taxes—began in earnest. As a result, Asan, whose sales were mostly internal combustion vehicles, began to see its market share plummet, and its position as the world’s number three steadily retreated.
Surprisingly, the one that seized market supremacy in the EV era was not the United States, but China.
Chinese EVs, including BYD, used their massive domestic market and cheap labor costs as weapons to attack the global market.
This wave offensive by Chinese companies began to seesaw again once Chinese labor costs rose and the United States completed its humanoid innovation, but by then, Asan Motors had already been acquired by BYD.
“Director, the truth is, we are currently in no position to release our retained earnings.”
“Because of dumping?”
“Yes. Just as with semiconductors, the EV market will ultimately begin with an enormous war of attrition. In truth, every business is the same. After all the riffraff are cleared out through a game of chicken, only then does the technological competition begin. When the surviving companies gradually accumulate technological capability, at some point they reach the stage of an overwhelming gap. Then…”
“Latecomers won’t be able to set foot in the market.”
“Yes. That’s right.”
All the high value-added industries leading the global economy recently had followed this pattern.
First, pour in a massive amount of money to seize the market. Then, technological competition among the survivors. If they win that competition as well, they establish an extremely solid market monopoly. The losses incurred during the initial bleeding competition are recouped dozens of times over by then.
“Then the 100 trillion is a war chest.”
“Yes. Of course, we are also developing technology, but our first goal is to survive the game of chicken that is coming soon. In truth, no matter how much difference there is in technology, the current EV market has not yet reached a point where consumers can overwhelmingly feel that difference.”
“You mean to make up for lagging technology with price?”
“Yes. After protecting the market that way, we will devote ourselves to technological capability so that we will never suffer an overwhelming gap. To do that, we need an enormous war chest.”
When the conversation had reached a certain point, I gave a bitter smile.
This man had a very clear goal and even a concrete plan. Even so, he failed. As I expected, without a national-level strategy and approach, no matter how capable a businessman is, it has no meaning.
As he raised his voice, I casually asked him.
“Chairman Choi. Then who do you see as your biggest competitor?”
“It’s embarrassing to even call them a competitor, but I am most conscious of the Chinese companies.”
“Not the United States?”
“No. Tesla’s technology, which was thought to be at an overwhelming-gap level, was caught up with far faster than expected. Also, with a solid domestic market, subsidies, and tariffs, the Chinese authorities are protecting the EV market with absolute thoroughness.”
He let out a sigh.
“And that’s not all. Right now, driverless taxis are running through the heart of Beijing. Unmanned delivery services began last year as well. From a company’s standpoint, it is the perfect test bed for experimenting with autonomous driving.”
“…What about Korea?”
“We are conducting limited experiments in remote areas, but they are meaningless. In the end, autonomous driving comes down to how independently our AI can respond in complex city centers, yet we’re just diligently driving on quiet roads.”
Perhaps because so much had built up in him, his voice rose again and again.
“I see. Then for now, you need money.”
“Yes. So shareholder return measures, for the time being…”
“Actually, that is not what I came here to discuss. I came to hear the difficulties companies are facing.”
“…Pardon?”
To him, who opened his eyes wide, I handed over the documents.
“It’s a block deal proposal. With this much money, you should be able to match the price for the master’s and doctoral graduates leaving for the United States, no?”
“Y-yes?”
“I am telling you to carry out a capital increase. To ensure it does not affect the stock price, the pension fund will purchase the entire amount.”
“A-a paid-in capital increase?”
“Yes. However, there is a condition. Please have Asan Motors invest the same amount that the pension fund additionally purchases into R&D. Then we on our side will exert our influence so that the recent no-dividend decision and the entire 100 trillion won in retained earnings are not taxed.”
Chairman Choi’s mouth fell open.
He must have thought I had come to threaten him into paying out retained earnings as dividends, so it was no wonder he was shocked.
“Are you… are you serious? A reinvestment of three trillion won?”
“Yes. This has all been discussed above. Not only that, even if you push ahead with no dividends in the future, we will continue to serve as your white knight. In exchange, please focus solely on technological development.”
“O-of course. With that much money, we can fully match the price for master’s and doctoral talent.”
“No. It will still not be enough. This is our additional proposal.”
When I presented the second gift, he let out a strange cry.
“Director! Are you serious about this?”
“Yes. I understand Asan Motors has come to need a great deal of urgent cash because of America’s IRA. Manage your retained earnings as retained earnings, and use this to cover the money needed for factory expansion.”
“Even so, Director… how could we issue Asan Motors corporate bonds at three percent? The current interest rate on Daehan Electric Power bonds is four percent. Corporate bonds should naturally be higher than that.”
“That is why I am saying we will purchase them all. Take the low-interest loan and cover the money you need to resolve immediately.”
“N-no, we cannot. At this level, it is practically interest-free. There will be controversy over preferential loans and whatever else again.”
“We will create all the excuses on our side. Are you truly not going to do it?”
Chairman Choi suddenly remembered the stories of his grandfather that he had heard at the breakfast table every dawn.
His grandfather, Choi Asan, had received nearly all government contract work thanks to his overwhelming ability, and the business funds needed for it were loaned to him through banks at extremely low rates. And because he never once betrayed those expectations, he had been able to create the Asan of today.
Yet now, decades later, the very same opportunity had come to him.
Three trillion won he would not have to repay, and ten trillion won that was no different from interest-free money… There was no way he could kick this away.
“…Director. Is there perhaps something you want separately?”
“Yes. Around the time these bonds mature, I would like to see good news. News that even if Asan Motors has not completely caught up in technological capability, at least a few of its components are number one.”
“In truth, we are preparing to some extent. Even if we lose our market position in the EV era, let’s make sure the U.S. and China must use at least one of our components… I don’t know about anything else, but batteries—we will absolutely make that one thing number one.”
“That’s good. It would be a technology like Hoam Electronics’ displays supplied to Apple, then?”
“Yes. That’s right. But is there nothing else you want besides that…?”
Understanding what he meant, I smiled.
“This is not a proposal I am making because I want personal compensation. All of these matters were decided not by me, but above.”
“I-is that so? How rude of me…”
“Not at all. I will trust that good technology will come out of this. Let’s wrap up the talks on the capital increase and the loan within this month.”
“Understood. We will proceed as quickly as possible.”
“Ah, Chairman Choi. I do have one favor to ask… It is not a solicitation, just a business-related request. Would you be able to hear me out?”
Chairman Choi gulped.
“Yes. Please tell me anything.”