Seoul Man: A Memoir of Cars, Culture, Crisis, and Unexpected Hilarity Inside a Korean Corporate Titan (20 page)

Under Sejong, the arts and sciences prospered, with the advancement of astronomy, agriculture, weaponry, metallurgy, and printing. (Contrary to popular notion, Gutenberg did not invent movable type. He advanced it and mass-produced the first printed book, the Bible, but movable type was in use in China in the eleventh century and metal movable type appeared in Korea a century after the Chinese invention.) One of Korea’s greatest inventors under Sejong was a natural-born engineer named Jang Yeong-sil who had come from the lowest classes. Had Jang been born under any previous Korean king, he would have, at best, been a village tinkerer. But Sejong recognized Jang’s genius and gave him a place at the Chosun court. Yang went on to invent
water clocks and sundials to mark the passing of time and celestial globes to track the path of the heavens a generation before da Vinci created his wonders in Italy.

Sejong was a voluminous reader of Mencius, an ancient Chinese philosopher who, legend has it, was taught Confucianism by Confucius’s nephew. Mencius applied Confucianism to government, writing that the good of the commoner was the highest goal of a rightly venerated king, who should act as a steward. In his inauguration speech, Sejong promised to rule benevolently, which he believed would create a harmonious state. For all of Sejong’s radical ideas about caste, his Confucianism did not destroy the hierarchy; instead, it clarified and rationalized it. At the same time he and his father introduced a crucial concept to Korea’s Confucianism that holds to this day: it will reward a person with a good idea if he plays by the rules. This is most clearly seen in Korea’s great
chaebol
, which hire the best output of Korea’s top universities and place them into a command-and-control, top-down structure. On its surface, such a structure may appear to be the enemy of creativity. And, indeed, such a system can prove an effective killing ground for new ideas if only for the number of hurdles the fledgling idea must span. But the system also applies discipline and rigor to creativity, which—left without it—can flail about aimlessly, produce nothing, and end up being rewarded simply for its existence, as has been seen in too many failed American dot-coms. Korean corporate Confucianism takes new ideas, wrestles with them, roughs them up, and—if they’re still standing—propels them to success with resources unavailable outside the
chaebol
.

At Hyundai, an example of this process was the sporty Veloster coupe, which debuted on the stage behind Vice Chairman Chung at the 2011 Detroit Auto Show. Because of its weird nature—one door on the driver’s side and two on the passenger’s
side—and its sleek but unusual hatchback design, the Veloster was never meant for the production line. Instead, it was rolled out at the 2007 Seoul motor show as a just-for-fun concept car. The press reaction, particularly from the Korean media, was highly favorable, however, catching Hyundai by surprise. So the company researched the car’s possible market segment, considered features and pricing, studied potential competitors, and found only one—the well-liked but decidedly retro Mini—and decided there was room for a sexy, modern-looking rival. The view from the top of Hyundai was not pro-Veloster, but the concept and the research won the day. Hyundai introduced the production-model Veloster in 2012 and wowed critics with its creative design, which proved to have a lasting impact. In the auto business, a “halo” car is typically the brand’s most expensive model, and although its sales are respectable if modest, the car is meant to throw a halo over the other models, which in theory benefit from the halo’s fairy dust. The classic halo car is the Chevrolet Corvette, a world-class supercar that shares nothing with the bread and butter of the Chevy lineup—its pickup trucks and sensible sedans and SUVs—except the brand name. For many critics, Veloster was a “reverse halo”: a $22,000 high-mileage car whose design and sexiness were so profound as to make people think differently about the entire Hyundai lineup.

In many ways, the Veloster epitomized the version of Confucianism shared by China and Korea: Confucianism as an efficient means to order civil society and the bureaucratic process and to get things done. When Japan imported Confucianism via Korea in the sixth century
A.D.
, scholars hewed to the Confucian principles of harmony and humaneness. Yet Japan never adopted Confucianism’s elaborate exam culture meant to ensure competent civilian administration, which is still embedded in China and Korea. This was the way of the scholar-bureaucrat. Instead,
over time, Japan’s brand of Confucianism became a way to validate the country’s Japan-ness. It elevated the samurai, who stood atop the Confucian hierarchy, creating the warrior-bureaucrat. Chinese-Korean Confucianism values duty to parents and loyalty to a ruler. If a conflict exists between the two, generally duty to parents outweighs duty to ruler. In Japan’s version of Confucianism, however, there is no conflict. Duty to parents means absolute loyalty to a ruler. This, combined with Japan’s intense chauvinism, effectively nationalized and militarized Confucianism in Japan.

I understood the similarities between Korea’s and China’s Confucian social organization and understood that both Korea and China had suffered under Japanese invasion and occupation, uniting them in an enemy-of-my-enemy way.

Now, whether this history has any bearing on why Hyundai sells more cars in China than anywhere else in the world is open to debate.

As Hyundai’s biggest market (the U.S. is number two, Korea is number three), China accounts for nearly 25 percent of the company’s total global sales. Hyundai built its first factory in China, near Beijing, in 2002, added two more in the following years, and in 2014 said it would build a fourth and fifth plant, bringing Hyundai’s combined manufacturing capacity in China to 1.4 million cars per year.

Chinese car buyers have embraced Hyundai, as they have most imported cars. China has its own massive auto industry, with more than 170 automakers. This is radically different in scale but no different in practice from the early U.S. automotive industry, when dozens of automakers sprang up, competed, and died off. The concept of a Big Three is relatively recent and dates only to American Motors’ subsumption into Chrysler in the 1980s.

Western auto analysts expect a rapid consolidation of the Chinese
auto market in the coming years, with eventually five to eight of the biggest brands, such as BYD, SAIC, Geely, and Chery, buying up the smaller ones and surviving. China has great plans for its domestic auto market. In the medium term—say, ten to twenty years—Beijing wants five of the world’s top-ten-selling brands to be Chinese.

But they have a long way to go. First, they have to convince Chinese buyers. Many are newly affluent and, as is the custom with new-money cultures around the world, that which is foreign is seen as more luxurious and preferential.

The top-selling foreign automakers in China are GM and Volkswagen. The combination of German brands—VW, Mercedes, BMW, and Audi—account for nearly one-quarter of all sales. Sales of Chinese brands—from those 170-some automakers—account for about 40 percent of the market. Hyundai and Kia combine for about 9 percent of the market.

Hyundai, like all automakers, quickly learned the Chinese auto buyers’ preference, and it is for bling. Even if Chinese buyers are purchasing a bargain-priced family car, they want it to look prestigious. To cater to the Chinese buyers, Hyundai in 2013 launched a Chinese version of the Elantra, its biggest-selling car around the world. The Chinese Elantra, called Langdong, is slightly longer but more important replaces the subtle Hyundai hexagonal grille with a shining chrome grille. The Langdong is one of Hyundai’s biggest-selling models in China.

The Chinese auto market, like most of its markets, is a tricky bargain for foreign companies. The hundreds of millions of potential customers, many of whom are growing richer and more global by the second, is irresistible. But in order to reach them, foreign companies must wade through the often impenetrable Chinese bureaucracy, deal with corruption and outright intellectual property theft, and—at least in the case of the auto industry—partner with Chinese automakers, many of which are owned by the state.

Beijing requires all foreign automakers to form a 50–50 joint-venture (JV) partnership with domestic automakers if they want to do business in China. It’s not always a one-to-one partnership: more than one foreign automaker will partner with a Chinese automaker or a holding company. Each of these JVs requires government approval. The reality of this creates strange alliances. One foreign automaker may end up in a partnership with a Chinese automaker that is also partnered with one of the foreign automaker’s competitors. For instance, Chinese automaker Dongfeng has JVs with Nissan, Honda, and Kia—all direct competitors with each other. Many of the state-owned automakers, such as Chery, survive on state subsidies and profits from their JV partner. This is a market inefficiency, one of the many found in the planned, centralized Chinese economy that places social stability above economic goals. And this is simply the price of doing business in China.

As a resident of Seoul for more than three years, I was immersed in Korean culture, but my geopolitical center of gravity was China. There was no way it could be otherwise. I spent more time reading and thinking about China in those years in Korea than I had in my entire life. China is the great sun in Asia, illuminating the hemisphere, keeping objects in orbit around it, and at times giving off the vague threat of going supernova at any moment.

My first trip to China came in spring 2011, when Rebekah and I decided to take a long weekend trip. We joked about the oddness of our new lives—“popping off to Shanghai for a weekend”—and although we didn’t feel like international jet-setters, it probably looked that way on Facebook.

As China’s financial center, Shanghai feels like New York, especially in the get-rich 1980s: rich, fast, smart, and almost independent of the nation’s capital. It throbs with materialistic avarice.
Rebekah and I had lunch at an outdoor café in the trendy and expensive Xintiandi shopping district. Our waiter was a young, really,
really
wired Chinese guy with very good English and an affable if in-your-face style.

He found out that we were Americans and delighted in telling us how much he loved “he-men” Americans, such as George W. Bush and John Cena, the WWE wrestler. He whipped out his camera phone and showed us a selfie he’d taken with the world’s richest man, Carlos Slim, who of course had visited his café a month earlier. And he was struck with Rebekah.

He told me he’d seen a lot of American women but that I had “picked the best.”

“You must be successful,” he added, obviously missing my movie-star looks. “You CEO?”

That night Rebekah and I had one of the better dinners we’ve had, ever, at a restaurant on the western bank of the Huangpu River, overlooking the multicolored lights playfully dancing up and down the skyscrapers of Pudong across the river. On the balcony of the restaurant, large Chinese flags flapped in the breeze, a characteristically Chinese juxtaposition with the skillfully prepared Western meal we were enjoying. After dinner, we held hands and walked along the Bund, or west bank of the river, with the European architecture of the French Concession to our left and the Jetsons-like futurescape of Pudong glimmering to our right. It was February, but the temperatures were in the sixties. It was impossible not to feel like you were walking in the past and looking into the future. This is the moment when China seduces a tourist.

But as cosmopolitan and romantic as Shanghai felt, we remembered we were in China when we returned to our hotel. Rebekah noticed her Kindle had been tampered with. Someone had entered our room, taken the e-book reader from its leather case,
fiddled with the back, and awkwardly returned it to its case. We were reminded of a story told to us by Foreign Service friends in Seoul who had been posted to Moscow during the latter years of the Soviet Union. They’d return to their apartment and find a cigarette butt floating in the toilet, left there on purpose to let them know they were being monitored by the state. This episode, and several articles I read by foreign businesspeople traveling to China who’d had their electronics tampered with and hacked, led me, on subsequent business trips to China, to never let my electronics out of my sight. I’m sure I looked a little pretentious carrying my iPad all around motor shows, but it gave me peace of mind.

Going to China was not easy for me. I was a Cold War kid, and was raised to fear and oppose communism, whether Sov or ChiComm. But my suspicion of China was not only legacy-based; I kept up with the news. I recognized that the Chinese version of communism was different from the Soviet version, had lifted hundreds of millions of Chinese out of poverty for the first time, had provided a massive export market and jobs to the U.S. and was open to the outside world in a way the USSR never was. Nevertheless, China is totalitarian, brooks no political dissent, and shackles free speech and worship. I was ambivalent about spending my money on a holiday trip—a nonnecessary visit—that would, in its almost incalculably small way, I acknowledged, go toward propping up a regime that I believed oppresses its citizens.

But curiosity got the better of me, so we decided to make the most of our chance. We hired a young female Chinese tour guide, Julie, to show us Zhujiajiao, a 1,700-year-old town about an hour outside of Shanghai built around a number of streams, canals, and small rivers. It has become a tourist site and is promoted as “the Venice of Shanghai.” We visited homes and bridges
built during the time of the Italian Renaissance and took a canal boat ride. We pushed our way through narrow streets lined with vendors selling trinkets and Chinese food as the old lady shopkeepers came out from behind their goods and grabbed us by the arms, physically dragging us toward their stalls in a rural replay of Shanghai’s relentless quest for lucre. Fried silkworms sizzled on hot grills; their pungent smell of burned hair filled the air. At the “Setting-fish-free Bridge,” locals sold small carp in bags filled with water. You were supposed to let them go in the river, which would bring good luck and carry away your bad luck with the fish. It’s unclear if your bad luck got passed on to the next customer, because we could see people downstream scooping up the carp with nets for resale.