I don't know how Yogi Berra's "deja vu all over again" would translate into Korean, but that is what is happening in the Land of Morning Calm. It is beginning to look like a replay of the 1997-98 chaebol and government shadow boxing amidst mounting economic problems.
The Korean government is still demanding chaebol reforms that have gotten only lip service in years of sparring between the two sides. Meanwhile, when push comes to shove, government-backed banks are moving to bail out financially-strapped Korean companies one more time.
Some corporate names have changed, but Hynix Semiconductor Co.(nee Hyundai Electronics Industries Co.) is again the focus of a Korean semiconductor quandry. Three years ago Hyundai and the former LG Semicon Co. were embroiled in a shotgun marriage that government matchmakers hoped would bring order back into the embattled Korean chip industry.
Now the merged entity is facing the same financial struggle that the forced marriage was supposed to remedy.
And just as before, government money is being transfused into the troubled Hynix Semiconductor. The government-owned Korean Development Bank, after agreeing to buy 80% of Hynix bonds maturing this year, is poised to loan the firm more funds to get the chip maker out of its latest crisis.
For its part, Hynix maintains that negotiations with creditors are working out a refinancing deal to get the firm over its current hump. A spokesman was adamant that Hynix is not seeking any debt forgiveness or planning to convert any debt into equity. The chip maker is continuing to pay its interest and principal on all debts.
Ironically, while one arm of the government is trying to pick up domestic companies that have stumbled, another arm is trying to hammer Korean conglomerates into long-stalled reforms. Government officials are still jawboning the chaebols to pare down, and drop cross-subsidies of intertwined affiliates.
Critics note that the government has been demanding for years that the chaebol drastically cut down their massive debt overload, while at the same time helping underwrite new debt for many of the troubled operations.
The latest political minuet is over a new government threat to allow class action suits against the chaebol for faulty corporate actions. But indicative of the Korean "talk loudly but carry a little stick" behavior, the government won't carry out its class action legal threat unilaterally. It offers to relax current restrictions on expansion imposed against the largest top 30 chaebol, so only the biggest half dozen conglomerates would be affected.
Using a government arm to pump money into Hynix doesn't set well with many foreign rivals, especially vocal Micron Technology. Lobbied heavily by the Boise, Idaho DRAM maker, U.S. Treasury and trade officials are reminding the Korean government that it promised none of the 1997-98 International Monetary Funds bailout money would be diverted to the country's chip firms. Micron and the U.S. officials charged the Korean firms had caused their own financial trauma by unwarranted massive expansion funded through almost blank check borrowing.
But the U.S. complaints are lost in the constant Korean din over handling the chaebol. And when chips account for 15% of the total Korean exports, the government has a strong interest in trying to stabilize the domestic semiconductor industry, battered by the severe global nosedive.
The Koreans appear to be adhering to another Yogi adage: "When you come to a fork in the road, take it."