Ugly Face of POSCO
South Korean steel giant POSCO is causing controversies both at home and abroad by making a series of unethical business practices.
It has been found that POSCO reportedly forced a subcontractor that participated in the construction of its automotive steel sheet manufacturing plant in Thailand to transfer its management rights to another subcontractor and forced the former to provide a payment guarantee at the same time.
The transfer of management rights took the form of a request from the head of POSCO Thailand and a transfer agreement following the request. However, it was actually coercion on the part of the subcontractor in view of their business relations.The subcontractor, in addition, had to provide a payment guarantee of 6.5 billion won (US$5.8 million) during the construction of the plant at the request of the head of POSCO Thailand. Then, he was replaced with another executive without any notice. The company asked POSCO to retract the guarantee, and then POSCO demanded 500 million won (US$45,000) for the retraction. The company had to pay the money in the end.
In the meantime, it has been reported that POSCO Engineering, a subsidiary of POSCO, did not pay costs in August last year to subcontractors that took part in the construction of the POSCO TCS plant while threatening the presidents of the companies with Thai soldiers. POSCO Engineering was absorbed by POSCO E&C in February this year.
The construction of the POSCO TCS plant, which is located in the Amata City Industrial Estate in the Rayong Province, was completed in August last year. At the completion ceremony, POSCO Chairman Kwon Oh-joon said that the plant would be the center of POSCO’s business in Southeast Asia as a whole. According to some news reports, however, POSCO has yet to pay approximately 300 billion won (US$270 million) to South Korean subcontractors there. It is said that its bullying has resulted in the bankruptcy of multiple subcontractors in the region along with pecuniary damages amounting to more than 13 billion won.
Under the circumstances, South Korean Prime Minister Lee Nak-yon recently told the government agencies including the Korea Fair Trade Commission to look into the case. POSCO has been making gestures to pretend to comply with the new administration’s policy direction of the mutual growth between large businesses and small ones by launching the “Win-win Council with Subcontractors” within the company. However, POSCO’s unethical attempts and malpractices to swing its weight against subcontractor at home and abroad are still on the march.