Flag carrier on the block

Chaebol owners not free from responsibility for mismanagement

Kumho Asiana Group is about to sell off Asiana Airlines, the smaller of Korea's two national flag carriers after Korean Air. The cash-strapped conglomerate said Monday its board of directors held a meeting and decided to put the group's flagship and core asset up for sale.

If Kumho's creditors approve the self-rescue plan, the group will likely escape its liquidity crisis for now. If the nation's second-largest airline and its affiliates break away from the group, however, Kumho, which once was the nation's seventh-largest conglomerate, will be reduced to a medium-sized chaebol, left with only express bus, construction and resort units.

The decision to sell Asiana Airlines is a desperate attempt by former Chairman Park Samkoo to save the rest of the group. A week ago, Kumho tried to get an additional funding injection of 500 billion won ($441 million) by ousting Park from management for good and offering the owner family's stake in Kumho Business as collateral, only to be rejected by creditors as "insufficient to regain the market's trust."

Kumho's liquidity crisis traces back to its acquisition of Daewoo Engineering and Construction in 2006, which was too big for the airline-petrochemical group to take over. This and other overstretched M&As led to repeated aggravated bottom lines and cash flow problems at the group with its major affiliates undergoing corporate workout procedures. The prolonged financial difficulties finally spilled over to the group's cash cow, Asiana Airlines.

The crisis of Kumho-Asiana shows chaebol owners can no longer be free from responsibility for management failure. In the past, the government and state-run banks provided additional funding when large conglomerates fell into a liquidity crisis, giving rise to the ｅxpression "too big to fail."

The times have changed, however. If the financial authorities and creditors provide taxpayers' money to large shareholders who will not take responsibility for their mismanagement, people will not forgive them. Managers, be they chaebol owners or smaller entrepreneurs, must bear in mind that they can always be kicked out of the market if they fail to prioritize the shareholder and client values, or sharpen their global competitiveness.