Lee Dong-geol Warns Hyunsan: "You Could End Up Like Bankrupt 'Montgomery'"

[Asia Economy Reporter Kangwook Cho] "We need to see how a company that was the largest retail firm just before World War II declined."

Lee Dong-geol, Chairman of KDB Industrial Bank, sent a stern warning message to HDC Hyundai Development Company (Hyundai Development), regarding the practically stalled merger and acquisition (M&A) of Asiana Airlines. In particular, Chairman Lee cited 'Montgomery Ward,' one of the two major pillars of the American retail industry in the 1900s that has now disappeared into history, urging Hyundai Development to make a 'wise' decision.

At the end of an online briefing held by the Industrial Bank for reporters the previous day, Chairman Lee suddenly spoke up, saying, "I was going to just watch from the sidelines," and added, "Recently, past cases have been coming to mind." He referred to the famous rivalry between Montgomery Ward and Sears in global corporate history.

Montgomery Ward and Sears, right after World War II in 1945, devised new management strategies based on future economic outlooks. Montgomery Ward, convinced that soldiers returning from the war would become unemployed and fall into depression, reduced investments and accumulated cash in banks. In contrast, Sears expanded its business through bank loans, preparing for increased demand. Sears pursued an aggressive strategy by opening department stores in major cities to attract consumers. As the postwar U.S. economy rapidly grew, Sears thrived while Montgomery Ward suffered significant damage and declined.

The reason Chairman Lee cited these two companies is that he judged the current industry downturn caused by the COVID-19 pandemic to be similar to the period before and after World War II. If Hyundai Development's acquisition of Asiana Airlines fails due to the aviation industry's slump caused by COVID-19, it could be an 'error in judgment' like Montgomery Ward's. The market views Chairman Lee's sharp warning as implying that Hyundai Development might end up like Montgomery Ward, which disappeared into history due to such misjudgment. Montgomery Ward, boasting a 128-year history, ultimately declared bankruptcy at the end of 2000 after failing to overcome management difficulties.

Chairman Lee said, "Once the current dark clouds clear, the future of the aviation industry is not bleak," and added, "We need to look at the aviation industry with a long-term perspective." He also pointed out, "Considering the process so far, there are aspects that raise doubts about whether market trust can be claimed," and warned, "If market trust is not gained, it could cause many obstacles in various negotiations and economic activities."

This content was produced with the assistance of AI translation services.