[Defense Brief] The Current Administration Also Fails in Appointing KAI President

Every time the administration changes, the defense industry stirs. This is because of the appointment of the president of Korea Aerospace Industries (KAI), the senior figure in the defense industry. The government has controlled the appointment of the KAI president. KAI was established during the Kim Dae-jung administration by consolidating struggling airlines, with the Korea Export-Import Bank, a state-run bank, as the largest shareholder. It is a 'company without an owner.'

The KAI president position has been filled by political favors with each administration. The management style resembled that of a government office. The company was overly concerned with government approval and indiscriminately hired acquaintances. This process also damaged the organizational culture.

The first president of KAI was former president Lim In-taek. Lim served as the 35th Minister of Transportation. The second president was former Army Chief of Staff Gil Hyung-bo. Gil was appointed president just 10 days after retiring as Army Chief of Staff, a typical parachute appointment. The third president was former Minister of Trade, Industry and Energy Jeong Hae-joo, and the fourth was former Deputy Minister of Industry and Resources Kim Hong-gyeong. Management disruptions were severe. Operating profits plummeted due to penalties for delays in the P-3CK patrol aircraft, delays in the delivery of the Surion helicopter, and losses from the army corps-level UAV project.

The Park Geun-hye administration replaced Kim Hong-gyeong, who had more than a year left in his term, with Ha Seong-yong. Although Ha was from KAI, he was effectively considered an outsider. In 2017, the first year of the Moon Jae-in administration, Ha was named the first target of the new government's defense industry corruption investigation. President Yoon Seok-youl's troubled relationship with KAI began then. At the time, Yoon was the head of the Seoul Central District Prosecutors' Office and led the investigation into defense industry corruption. The investigation ended inconclusively. Prosecutors applied 11 charges including accounting fraud and embezzlement against former CEO Ha Seong-yong and sought a 12-year prison sentence. However, most charges were acquitted in court, and he was given a suspended sentence. From President Yoon's perspective, KAI became an uncomfortable company.

Parachute appointments, deficit management, and designation as a defense industry corruption company

Under the Moon Jae-in administration, Kim Jo-won, a former Secretary General of the Board of Audit and Inspection, took the position. Kim later moved to the Blue House as Senior Secretary for Civil Affairs but resigned in disgrace amid a multi-home ownership controversy.

After taking office, President Yoon appointed Kang Gu-young, a former Air Force pilot, as president. It was a 'circle of political favors.' The industry was unsettled, with assessments that KAI's future was bleak. Upon taking office, Kang immediately carried out a large-scale executive reshuffle as if pre-announced. Within three months, about 20 executives were sent home. The vacancies were filled with military personnel and figures from organizations Kang had been affiliated with. Side effects soon appeared. The Jinju Employment and Labor Office recently launched an investigation into allegations of abuse of power by a former Air Force reserve general officer. Allegations include throwing a glass because an employee filled a glass with water at a restaurant during an Iraq business trip and ordering personal errands after work. One employee was diagnosed with panic disorder and is undergoing treatment, while another claimed to have suffered verbal abuse.

Kang sparked controversy every time he attended international defense exhibitions. He wore a fighter pilot flight suit, which reportedly embarrassed foreign companies. The reaction was that he focused more on his identity as a fighter pilot than promoting the company's value and the fighter jets it produces. It was seen as merely showmanship. Sales were similar. KAI announced that last year it recorded consolidated sales of 3.8193 trillion won, operating profit of 247.5 billion won, and net profit of 221.8 billion won. The industry pointed out, "The business performance that KAI had been working on for a long time has come to be seen as Kang's achievements."

Suffering after large-scale executive reshuffle following Kang's appointment

Security conditions are even more serious. Following 2022, last year KAI received a poor score in the integrated defense industry technology protection survey, scoring 76 out of 100. This is more than 10 points lower than companies like Hanwha. KAI does not use Mobile Device Management (MDM) programs used by military units and defense companies. Instead, it used a program not approved by government security regulations called Mobile Copix. This program, developed at a cost of 670 million won, allowed employees on overseas business trips to work via their mobile phones. The possibility of internal information leaking externally was raised as a problem in the security survey. Its use was banned. As a result, company funds were wasted.

Incidents also occurred. Recently, an Indonesian employee was caught leaking data via a portable storage device (USB). KAI is focusing on the fact that it detected the leak itself, trying to avoid criticism of poor data management. The USB contained 49 types of documents related to the U.S. government's export license (E/L). KAI voluntarily reported this to the Defense Technology Security Administration under the U.S. Department of State on the 30th of last month, but backlash from the U.S. is expected. If this escalates into a diplomatic issue, there are concerns that joint aircraft development with Indonesia could be canceled.

President Yoon Seok-youl promised the establishment of the 'Aerospace Administration' during his presidential campaign. It is a key agency for space policy and space technology development. However, looking at the president of KAI, who leads the aerospace industry, the industry is already uneasy about who will become the future head of the Aerospace Administration. Given what has happened so far, it is not surprising that there is anxious speculation.

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