Since 2014, POSCO successfully completed 150 cases of restructuring.

Back in the 2000s, POSCO suffered its worst financial crisis due to failed investments in growing businesses. Its consolidated operating profit, which exceeded KRW 7 trillion at one time, recently fell to about KRW 2.5 trillion. POSCO’s cash on hand, which peaked at more than KRW 8 trillion, declined to nearly KRW 5 trillion, and credit ratings worsened as well.

That’s when CEO Kwon implemented the Innovation POSCO (IP) 1.0 and 2.0 projects successively to innovate the company’s financial structure and began broad-based restructuring. CEO Kwon recalls, “POSCO sold its non-core steel business, and merged similar businesses to increase efficiency and eliminate waste. We also liquidated low-yielding substandard businesses to prevent the aggravation of insolvency.”

As a result, the number of POSCO’s domestic affiliates decreased from 71 to 38, and the number of its overseas affiliates declined from 181 to 124. The company also recovered KRW 7 trillion over the 4-year period, and prevented annual losses of about KRW 400 billion.

Moreover, POSCO’s consolidated cash on hand increased to KRW 8.55 trillion at the end of the third quarter, repaid its debts by more than KRW 5 trillion and POSCO’s consolidated debt ratio dwindled to 67.6 percent, the lowest since 2010. Moody’s, an international credit rating agency, recently upgraded the forecast for POSCO’s issuer rating, Baa2, from negative to stable, and then to positive, and predicted that POSCO’s financial health will continue to improve in the next 1-2 years.

POSCO’s Future growth strategy is two-track: smartization and development of new growth engines.

CEO Kwon expressed his vision for the company In 2018 and beyond. He said, “POSCO plans to implement smartization with efforts such as combining ICT with its core businesses, ranging from steel and energy to construction and chemicals to develop newly converged businesses to lead the 4th Industrial Revolution.”

CEO Kwon delivering his new year’s message at the POSCO Family Kick-off Meeting 2018.

SEE ALSO: Building on a Year of Success: POSCO’s Top 9 News of 2017

The company will also accelerate the development of smart factories utilizing big data and artificial intelligence, and further enhance core processes for environmentally-friendly, highly-efficient and future-oriented steel mills.

In addition, CEO Kwon mentioned that POSCO will carry out new growth businesses this year in the energy and materials sectors. In the energy sector, POSCO will work to stabilize its power generation business, and expand its LNG midstream business by developing the Gwangyang LNG Terminal into the energy hub of Northeast Asia. POSCO is also planning to increase investments in renewable energy and seek business opportunities in line with government policies to reduce greenhouse gas emissions.

The company will also work to secure stable supplies of saline water and ores containing lithium in South America and Australia for its lithium business. It also plans to build accompanying infrastructure for mass production.

POSCO will also develop its own manufacturing processes for high-capacity cathode and anode materials used in secondary cells, and work to increase the sales of electric vehicles at home and abroad.

POSCO CEO Kwon Ohjoon greets employees after the kick-off meeting.

To close the event, CEO Kwon remarked, “For the next 50 years, let’s make greater efforts toward our goals with a clear and long-term perspective.”

Here’s a look at how steel is produced in a steel mill or factory, and what the “smartization” of steel factories will look like.

So, how is steel made?

Iron Making

To make steel, manufacturers first need molten iron. Molten iron comes from two raw materials; iron ore and coal. Iron ore is converted into sinter ore in a sintering plant and coal is converted into raw coke using a coke oven. The processed materials are poured into a blast furnace where hot air reaching 1200℃ is blown in from the bottom through tuyeres, causing a chemical reaction. This process oxidizes the coke and reduces the sintered ore, creating molten iron.   

Steelmaking

In the steelmaking stage, the molten iron is transported to the steel making plant via a torpedo car, where the liquid is poured into a converter. Then, oxygen is blown into the converter to burn off all the impurities. All that is left is pure molten steel.

Continuous Casting

This is where steel finally becomes solidified into different shapes such as slab, bloom and billet. Liquid steel is poured into molds and cooled as it passes through a continuous casting machine until it solidifies into the desired shape.

Hot steel passes through rolling machines to be rolled into specific sizes and thicknesses. (Source: Global Sourcing Blog)

Rolling Process

During the rolling process, steel is heated once more to achieve various sizes and thicknesses. Steel slabs are heated to over 1100℃, then pass through rolling machines. This results in hot-rolled coils that can be shaped for different uses such as thick plates. They can also be processed into long, wire-shaped rods for billets. Often, the hot-rolled coils are rolled at room temperature for cold-rolled coils. Cold-rolled coils can be fabricated to produce galvanized and electrical steel products.

“Smartizating” these processes will involve converging IoT, Big Data, and AI to connect the different facilities, IT systems and workers in order to collect and analyze data for optimization.

POSCO is “smartizing” the steel-production process

POSCO is a steel company looking to lead the industry in adopting smart factories. CEO Kwon Ohjoon made “smartization” one of the 4 key priorities for POSCO starting back in 2014, and Kwon will continue to increase those investments.

POSCO smart factory incorporates artificial intelligence to enhance safety and efficiency.

SEE ALSO: How Smart Factories are Changing the Manufacturing Industry

In 2016, POSCO established its Smart Solution Council in order to research AI, big data and IoT applications. In the same year, POSCO ICT’s smart factory platform, PosFrame, was completed and installed in POSCO’s Gwangyang Steel Mill. PosFrame allows engineers to collect and monitor big data. So far, the company has saved over USD 14 million by incorporating the new technology in its production practices.

Here are some other features of POSCO’s Smart Factory.

POSCO’s Smart Blast Furnace

The Pohang Blast Furnace No.3 became a smart furnace in 2017, following a 102-day repair period. The furnace is now equipped with automated sensors that monitor and control its internal conditions using AI technology. Smart sensors monitor the blast furnace for factors like raw material quality and ventilator status, preventing breakdowns and ensuring a much longer lifecycle.

SEE ALSO: Will Artificial Intelligence Lead to Breakthroughs in the Steel Industry?

Worker Safety

Smart sensors can be used for more than just process monitoring. The company is working toward a full implementation of smart sensors for safety purposes, using IoT to create a better working environment.

Steel manufacturing involves high temperatures and high pressure levels, which is dangerous for workers who come in close contact with the equipment. With smart sensors monitoring all of the factory information, workers will instead be monitoring operation from a safe distance.

Workers in POSCO’s smart factory wear smart sensors for safety.

Wearable sensors, in conjunction with factory smart sensors, will be able to detect if and when workers are approaching potentially dangerous areas, and will alert them. These sensors will also detect and alert with regards to any impending accidents, or life-threatening situations like gas leaks, explosions, or fires.

Also, dust, sulfur, and nitrogen compounds will be removed via a high-plasma method, creating an eco-friendly steel plant and a healthier environment for workers.

POSCO will continue to add more smart features to its steel mills to increase efficiency, safety and sustainability. In efforts to learn and implement new technologies, POSCO CEO Kwon Ohjoon visited GE’s smart factories to learn about their technology earlier this year. POSCO also held the 2017 Smart POSCO Forum to share its insights with clients and affiliates, all as part of its expanding smartization efforts.

Since 2014, sales of products combined with Solution Marketing have tripled, and sales of POSCO’s World Premium Products (WPP) have increased by 56 percent.

It Wasn’t Always Smooth Sailing

When the 2008 global financial crisis hit, the global economy as a whole suffered. The steel industry experienced stagnant growth, even in its subsequent recovery. From 2012 to 2016, annual steel sales remained fixed at 35 million tons.

The 2008 Financial Crisis was felt in markets all over the world. (Source: South China Morning Post)

The main culprit for the slow recovery was overproduction, mostly from the heavily-subsidized Chinese steel industry. Between 2000 and 2014, steel production doubled from 800 million to 1.6 billion tons, exceeding the global demand for steel by 100 million tons.

As a result, steel markets around the world saw prices falling, layoffs and steel mill closures.

SEE ALSO: Asian Steel Watch: Megatrends Shaping the Future of the Steel Industry

A Strategy for Success

In order to stay competitive in a stagnant market, POSCO made the decision to focus on Solution Marketing and the sales of its World Premium Products (WPP) such as POSCO GIGA STEEL for cars and PosMAC for solar panels.

Solution Marketing involves hyper-customization for POSCO’s partners to deliver optimal material solutions for their products. Some notable projects this year have been with automakers GM Korea and Ssangyong Motors for the launch of their new models made of POSCO GIGA STEEL. POSCO gave them full support from development and R&D to testing and post-production evaluations, redefining the role of a steel supplier.

GM Korea and POSCO worked together to incorporate POSCO GIGA STEEL into the 2017 All New Chevy Cruze. (Source: GM Korea)

As a result, POSCO’s operating profit margin (individual basis) was 10.8 percent in 2016, making it one of the highest performing steel companies in the world. Its recovery and growth continued into 2017.

SEE ALSO: 6 Reasons Why POSCO GIGA STEEL is Ideal for Automakers

Cultivating the Industry

Following its continued success with Solution Marketing, POSCO is now determined to share its insights and technology with up and coming small and medium-sized enterprises (SMEs). POSCO has completed 32 shared-growth projects through which they work with SMEs to develop ways to cut costs, improve the quality of their work, provide financial assistance and education and training.

One of the most recent projects for shared growth is a collaborative business model called “System Construction” that provides a framework for effective technical cooperation among POSCO’s partners in the construction industry. The model was developed jointly with NI Steel and entails systemizing composite materials such as beams, floor decks, exterior panels and roofing materials, all based on joint R&D from both parties.

Under System Construction, workers from various sectors come together for joint development.

POSCO is continuing its efforts to advance its competitiveness by providing material and technical solutions to its partners, and along the way, fostering the growth of SMEs in various industries to ensure a more stable and robust economy.

In the opening speech, CEO Kwon remarked, “As global economic conditions are rapidly changing, our two countries must work together to expand our cooperative relationship,” and emphasized the protection of free trade and reinforced complementary cooperation between the two countries.

At the general meeting, the panelists of the two countries discussed industries with potential for bilateral cooperation including investment, resources and infrastructure, the 4th Industrial Revolution, and food and agro-livestock.

In particular, the panelists discussed ways to uncover new industries in line with the 4th Industrial Revolution, methods of treating energy waste, and joint development of the health and food industries, and current global issues.

The Korean delegation to this annual meeting consisted of over 50 people, including CEO Kwon, Chairman of SM Group Oh-hyun Woo, GS E&C President & CEO Sang-gi Lee and Lotte International Senior Managing Director Gi-ho Jeong. The Korean council members attended the joint meeting, and visited the Startup Precinct in the outskirts of Brisbane, and discussed the venture firms and start-up ecosystem of Australia.

The AKBC is the only private economic consultative organization of the two countries. It has been promoting bilateral cooperation between the two countries for about 40 years since its establishment in 1979.

Photo cover courtesy of Federation of Korean Industries.

SDGs are common goals of prosperity and development adopted by the UN in 2015 for the international society to achieve by 2030. There is a total of 17 goals, including eradicating poverty, quality education, good health and well-being, human rights and climate action.

The organization commended POSCO’s initiatives for tackling the housing crisis in its overseas and affiliate communities, and its commitment to improving the quality of life of local residents. Details of the POSCO Steel Village Project will be posted on the UN SDG official website, and if selected as the exemplary case of SDGs at the UN ministerial meetings, the project will be recorded in a permanent document of the UN as an example for other companies and organizations.

POSCO CEO Kwon Ohjoon said, “POSCO will carry out social contribution activities to help realize a better world in the best way we know how. As a global corporate citizen, we will fulfill our social responsibilities by aligning our goals with those of the UN SDGs.”

The POSCO Steel Village Project is a part of the POSCO 1% Foundation which uses POSCO’s materials and construction techniques to build houses, bridges and welfare facilities for people living in poverty. Over the years, POSCO has built steel houses, indoor playgrounds for children and steel bridges for the underprivileged living near its business operations in Korea and abroad.

Cover photo courtesy of the UN.

POSCO will be modifying its mid-term strategy in order to achieve “growth with substantiality”. On May 19 at the Korea Exchange in Yeouido, Seoul, POSCO had its first investors forum since CEO Kwon was installed as the new CEO. On this day, new management strategies to restore financial soundness based on a focus on the core steel business, mega growth, and management restructuring for efficiency were announced.

 Pictured here: CEO Ohjoon Kwon, speaking at the POSCO Investors’ Forum

According to the new management strategies, POSCO has plans to strengthen its EBITDA to 8.5 trillion won with Credit A ratings by 2016, to be at the global top standards for financial soundness.  At the same time, POSCO has plans to cultivate its source material and clean energy businesses to promote mega growth.

Pictured here: CEO Ohjoon Kwon, speaking at the POSCO Investors’ Forum

In order to achieve its mid-term management goals, POSCO plans to change from its former ‘Own & Compete’ based M&A strategy to a ‘Connect & Collaborate’ based strategic partnership, with plans to seek a diverse range of domestic and international companies.

POSCO’s business structure will be reformed so that the strategy that previously focused on expanding steel, materials, energy industries will now be focused on the core steel business and promote mega-growth engines in the two sectors of source material and clean energy. The projects nominated for focused development are source material which encompasses lithium, nickel and clean energy which includes fuel cells and clean coal businesses.

Other fields can be subject to subsequent business restructuring if it will increase the company value and meet the following principles:

1)      First, evaluate whether the entity is recognized as top tier in the domestic market or is seen as essential towards strengthening the competitiveness of the core steel business

2)      Second, even if it is a blue-chip affiliate, consider pushing ahead with the sale or IPO of shares that exceed what is necessary to maintain right of management

3)      Third, plan internal restructuring to strengthen efficiency based on business consolidation, divisions or other adjustments

 Pictured here: Attendees at the POSCO Investors’ Forum

The priority will be placed on restructuring that has the most impact and can relatively be done easily. Although specific plans for restructuring have not been confirmed yet, entities that have been selected will promptly push ahead to show results.

The reorganization that emphasizes the steel business will select seven strategic industries including automotive, marine and energy to grow sales and expand the sales percentage of profitable, premium products. In addition, in order to turnaround overseas business to surplus by 2016, POSCO plans to develop high added-value products in a timely matter to meet market demands and also strengthen solution marketing offerings.

The energy business plans to grow the domestic coal power plant market and target emerging markets for overseas growth while also fostering the fuel cell industry. It also has plans to devote initial investment towards securing technologies for the source material business to strengthen competitiveness.  Business entities including E&C, Trading, and ICT will focus on core competencies that will provide profitability and growth for the entire company.

Pictured here: Q&A session during the POSCO Investors’ Forum

If POSCO’s new management strategies run smoothly, POSCO can expect 32 trillion KRW in sales with 3 trillion KRW in operating profit, 9% operating profit margin, on a stand-alone basis.  On a consolidated basis, that would mean 78 trillion KRW in sales with 5 trillion KRW in operating profit, 6% operating profit margin. Debt-to-equity ratio can be expected to be lower as well.

Pictured here: Panel discussion at the POSCO Investors’ Forum

At the investors forum, CEO Kwon announced, “The strategy paradigm will change in order for POSCO to have stable growth and we will focus on strengthening competitiveness and improving profitability.” Moreover, he said, “With drastic restructuring focused on internal efficiency, we will give back to shareholders, investors, customers, partners, employees, local communities and all those who support and love POSCO.”

Pictured here: Ohjoon Kwon, speaking at the POSCO Investors’ Forum

Growth laid on internal strength will allow POSCO to achieve the new vision of ‘POSCO the Great!’

Pictured here: POSCO’s CEO, Kwon Ohjoon, visiting Hyundai Heavy Industries on April 4, 2014. Hyundai Heavy Industries’ CEO, Jaesung Lee (left) having a discussion with POSCO’s CEO Kwon Ohjoon (right).

Pictured here: CEO Ohjoon Kwon visiting employees at steel mills after his inauguration on March 14, 2014

Efforts to Create the Best Workplace for Women

the first open conversation session with the CEO invites female executives

In order to achieve ‘POSCO the Great’, CEO Kwon firmly believes in the need for open communication. On this basis, the first open conservation meeting was organized on April 24 to create a space where CEO Kwon could listen to the voices of female executives and hear the company needs while having a casual lunch.

At this particular meeting, seven of POSCO’s female executives gathered to discuss topics pertaining to career advancement for women, work-life balance, how to communicate with colleagues and opinions about childcare benefits.

Pictured here: POSCO female executives gathered together with CEO Ohjoon Kwon

Policies and Direction for Female Employees

Female mentoring, corporate culture changes for better employee benefits, securing female talent

It is very normal for each and every one to worry about something different. During the session, the importance of offering women employees with mentoring opportunities that are appropriate for whatever level they may be at so that their work life feels less stressful was discussed.

In addition, POSCO employees who have children are provided with daycares and women are offered a leave of absence for up to 2 years on top of the given 90 days of maternity leave, before and after giving birth. At the meeting, there was a consensus for this well-designed benefit to be used freely. This is based on the long-term relationship that POSCO hopes for with its employees and how the company sees ‘children of employees as the children of our company’.

CEO Kwon carefully listened to the opinions of the women executives. He said for an efficient and effective system, ‘we need a corporate culture that embraces the maternity, childcare and other needs shared by colleagues and women staff’. He also stressed the need for continuous efforts from leaders to instill a warm corporate culture within the organization.

CEO Kwon ended the meeting on a positive note by expressing his expectation for great things to come from POSCO’s women workforce. He told the attending executives that he hopes they will use their executive positions to be a positive influence and provide guidance for future leaders within the company.

Listen to the Voices of Employees that make ‘POSCO the Great’ 

The open conversation session with CEO Kwon and POSCO’s female executives is only the first of many more sessions to come. In the future there will be more sessions to create opportunities for other employees including human resources, on-site staff, researchers and more to meet with CEO Kwon to have an open, honest communication. Through these proactive initiatives to gain greater insight into the opinions of POSCO employees, POSCO can come one step closer to making “POSCO the Great” a reality.

Pictured here: POSCO’s CEO, Ohjoon Kwon

Direction for POSCO amid Current State of Steel Industry 

In the Financial Times story printed on April 20, CEO Kwon expressed anticipation for POSCO’s future. CEO Kwon, aims to more than double the steelmaker’s operating profit margin to 10 per cent over the next three years. In order to improve profitability and financial strength, CEO Kwon’s goal is to find the most urgent business areas to let go of and to focus on developing technologies to create high-value advanced steel and further invest in core materials business, particularly for lithium and nickel. CEO Kwon elaborated on this during his speech about ‘POSCO the Great’ which you can read about here.

Nickel is an essential component for the production of stainless steel. POSCO is working towards reducing the production costs for nickel by as much as 20 per cent which could in turn reduce costs for stainless steel which is prevalent in every day objects around us including kitchen appliances, medical equipment, exterior walls and roofs and more.

According to the World Steel Association, global steel demand is expected to see lower growth this year. Weak demand and oversupply of steel is an issue that will not disappear any time soon. Demand from China has dropped to 3% from 6.1% last year and it is expected to drop even further to 2.7% in 2015.

Nevertheless, with a strategic focus, CEO Kwon is optimistic for greater performance over the next three years.

Click here to read the full article.

Reorganize POSCO’s Overseas Business to Focus on Steel Business

Pictured here: Chairman Kwon speaking to reporters on March 14

Do you think entering international markets is still valid today considering the delay of establishing an integrated steel plant in India, launching FINEX business in China, and beginning phase 2 construction in Indonesia?

It is true that some of the businesses are delayed. First of all, because India tends to have many decentralized policies, we have had to negotiate with many different bodies regarding business implementation and also had communication difficulties due to the cultural differences. However, the visit of President Geun-hye Park made a lot of improvement in terms of obtaining mineral rights and adjustment of land. Based on this, I think there will be acceleration in administrative implementation.

In China, they are planning to launch FINEX business. FINEX is the unique technology of POSCO and I think it is the core business that needs to be implemented continuously when considering the trend of future technology and ore processes. Therefore, we should continue to take the lead in this area.

In the case of Indonesia, regular operation has been delayed for about 2 months due to the unexpected accident, but it has stabilized again with the last month. It will be difficult to achieve surplus due to the loss of approximate 0.6 million tons of production caused by the accident, but we will do our best to make a gain next year.

Pictured here: Chairman Kwon discussing the future of POSCO at the media session on March 14

Synergy of POSCO’s Technology Buttressed by Marketing

POSCO has been emphasizing improvement of the competitiveness of steel which is its core business. Please elaborate on the improvements in more detail and also explain what the role of the Steel Solution Center will play in the future.

Pictured here: Chairman Kwon holding his first executive meeting on March 18

The core of POSCO is its steel business. Therefore, for POSCO to increase its competitiveness, it should strengthen its role as a leading steelmaker. To achieve this, I am planning to integrate marketing strategies to POSCO’s latest technology to create a synergy effect. The Steel Solution Center was also founded with this purpose in mind. Providing customers with integrated marketing and technology solutions will transform the company into a more customer-oriented company. By combining POSCO’s superior technology with the proper marketing strategies will allow us to fulfill customer demands by offering not only the products and techniques that customers want but a total solution.

Researchers must Understand the Field to Provide Customer-Oriented Solutions

According to the researchers at RIST, Chairman Kwon considers marketing side first when developing technology. What is your philosophy behind technology development and marketing? 

Pictured here: Chairman Kwon visiting Pohang Works to greet  employees right after his inauguration

RIST, as well as, POSCO’s subsidiary technology research centers, all carry out research for POSCO. Basically, I think any research center that belongs to a company should commercialize whatever technology they have to contribute to profit making. The series of EVI activities that POSCO does are an example of this. In order to achieve more practical and value-oriented research, researchers should find answers and be close to the actual sites. Furthermore, a system which allows engineers who are working on site to be able to create and apply their technology should be established. Moreover, communication with marketing staff and customers is very important. No matter how good a product is, if it is not aligned with customer needs, it won’t be sold. Therefore, POSCO is putting researchers in marketing departments to produce solutions that address customer needs.

Evaluation of Internal Competitiveness, Market Attractiveness, Entry Barriers and More

Are there specific plans for improving financial structure against the decline of steel demand and an oversupply caused by the global economic depression?

Pictured here: Chairman Kwon delivering his speech at the 46^th Shareholder’s Meeting on March 14

Presently, the biggest challenge for POSCO is improving financial structure. First of all, some businesses we think have little correlation will be listed on the stock exchange and restructured. Going forward we will try get our business direction aligned with shareholders in order to get more investments and improve debt ratios. We also have plans to re-examine existing businesses. We will consider internal competitiveness, market attractiveness, entry barriers and more to assess the businesses we should focus on and continue.

As the 8^th CEO of POSCO, how will you ensure equality for POSCO’s election & succession process?

Starting this year, a more fair system for CEO succession was performed. Outside directors were the core members of the Succession Council and only one internal director was involved. Chosen outside directors were not influenced by any external stakeholders. In addition, the candidate selection committee was composed of only outside directors to ensure fairness. I also went through a fairly rigorous interview process which made me feel like I was doing college admissions interviews again (laughs).

What are POSCO’s views on the changing domestic steel industry?

Until now, POSCO has been sort of the elder brother of the domestic steel industry. However competition has increased in the domestic market now. While there is no longer a monopoly, the increase in competition has helped Korean steel business become more advanced. Through healthy competition, the domestic steel industry has been able to grow. Cooperation and healthy domestic competition will help Korean companies become more globally competitive. Furthermore, cooperation and involvement in Steel Associations is integral to addressing environmental issues such as carbon emissions.

-Declared the 4 part innovation agenda that includes enhancement of steel competitiveness and financial structure to address crisis management

-Headed to steel plant immediately after inauguration ordering “world’s best products with competitive costs and quality”

Pictured here: POSCO’s Chairman, Ohjoon Kwon giving his inauguration speech at the Pohang headquarters on March 14^th

POSCO’s Chairman, Ohjoon Kwon has officially been inaugurated. On March 14, POSCO held its annual meeting of shareholders and board of directors to install Ohjoon Kwon as the 8^th Chairman & CEO. Following the shareholders meeting, he attended an inauguration ceremony at the Pohang headquarters wearing a Steel plant uniform and stated, “Oversupply in the global steel market puts a significant risk to POSCO’s competitive advantage” and therefore, “We need to regain our steel competitiveness based on the differentiated technology and a financial and organizational structure reform  to once again become the world’s leading steel company.”

Pictured here: POSCO’s Chairman, Ohjoon Kwon giving his inauguration speech at the Pohang headquarters on March 14^th

At the inauguration, CEO Kwon unveiled the new vision ‘POSCO the Great’ and stated that to achieve this, the ‘innovation POSCO 1.0’ would be actively promoted. ‘POSCO the Great’ implies ‘Let’s create a great POSCO’ and signals that the company will continue to contribute to the national economic development and create values for the world in order to become the most respected company nationally as well as globally. Reflecting Chairman Kwon’s philosophy and volition, POSCO 1.0 proposes a departure from pride and appearances and a return back to basics to regain unity and be the forerunner again. The goal is to become the world’s best in all business divisions by creating customer value through new ideas and unifying all employees under one vision.  Chairman Kwon announced a four part innovation agenda in order to quickly overcome the current crisis situation and prepare for the next 50 years of POSCO.

Pictured here: POSCO’s Chairman, Ohjoon  Kwon at the inauguration with ‘POSCO the Great’ and ‘innovation 4.0’ banners in the back ground

The first priority on the innovation agenda is to enhance the competitiveness of the steel industry. Its main focus is to create new, differentiating customer value through the combination of technology and marketing. The Company will create a Steel Solutions Center within the steel business division  to provide proactive response to customer needs and, also it will increase the sales of strategic products such as marine energy steel, high performance steel plates to cement its market position as a leading global steel company.

The second priority is to focus on the selection and concentration of plans that promote future growth. POSCO has been pushing ahead in materials, energy and other diverse new businesses, however going forward it will analyze business fit, core competencies, and market attractiveness to boldly determine whether to stop, sell or merge businesses for those businesses that are not globally competitive.  It will concentrate its growth energy in developing materials such as lithium and nickel that are essential for the future high-tech industry, as well as eco-friendly chemicals such as fuel cells and clean coal that are core of the clean energy business.

The third priority is to streamline the business structure and to dramatically improve the financial structure. For the time being, investment strategy will be focused on value-added growth rather than new investments for qualitative growth. Furthermore, at the appropriate time, it will list on the stock exchange certain subsidiaries that meet the IPO requirements or sell the equity holdings in order to maximize liquidity.

Finally, the management infrastructure will be reformed in areas such as internal organization, processes, and corporate culture . The current six divisions will be minimized to four for greater efficiency and to streamline decision-making hierarchy within the company. Furthermore, the number of executives in the supporting divisions will be reduced by 40% and transferred to marketing, steel mills, overseas offices and other divisions in order to boost performance. Especially, in order to promote strong performing organizational structure, individuals that hold expertise and experience will be appointed as expert executives and will be assigned to individual project with appropriate accountability and performance evaluations.

Pictured here: POSCO’s Chairman Kwon shaking hands with employees on the day of his inauguration

Shortly after the inauguration, Chairman Kwon paid a visit to #3 steelmaking plant in Pohang and encouraged employees with an indication of his management priority in the job sites. Steel plant furnaces are the heart of steelmaking companies as the filtered impurities from molten metal are transformed into high quality, top grade steel. On this day, Chairman Kwon announced, “POSCO will continue to invest in innovation in order for Pohang and Gwangyang Steelworks to once again produce the world’s best products with competitive costs and quality.”

 Pictured here: POSCO’s Chairman, Ohjoon Kwon visited workers at #3 steelmaking plant in Pohang shortly after the inauguration to reassure employees that he would help make POSCO the world’s best

Earlier, at the annual meeting of shareholders and board of directors, candidate Jinil Kim was appointed as in-house director and president of steel manufacturing, and Dongjoon Yoon and Younghoon Lee were both appointed as vice president in-house directors. Moreover, Ilsup Kim, President of Seoul School of Integrated Sciences & Technologies, Youngsun Woo, Executive Partner at law firm Seah, and Donghyun Ahn, Professor of Economics at Seoul National University were appointed as outside directors. Ilsup Kim and  Youngsun Woo will also assume the responsibility over the Audit Committee members.

See below for the full inaugural speech that Chairman Kwon gave.

[box]Fellow colleagues,

Valued shareholders, customers, stakeholders,

Ladies and gentlemen,

I am truly honored and thrilled to stand here today as the 8th CEO of POSCO. In my excitement, I also acknowledge the large responsibility I have to follow in the great success of POSCO’s past generations.

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Looking back to previous years, I can see the noble vision of the founders of POSCO. The first generation of this outstanding company strived to make something out of nothing, to build a solid foundation for our company in accordance with the direction of this nation.

Moreover, the following generations, armed with a passion for technology development and innovation, contributed to POSCO becoming one of the most globally competitive steelmakers in the shortest time in history.

With our unmatched commitment to staying competitive, POSCO has continued to create sound profits and consistent value. Furthermore, in the spirit of mutual partnership, we have shared growth with our various stakeholders. Such efforts have boosted Korea`s economic development, and have been praised by the Korean people.

Members of POSCO!

POSCO, once the pride of the nation, is now in the midst of unprecedented challenges. With credit ratings being downgraded and share prices being weakened, “expansion” may no longer be our highest priority. At its worst, survival of the company itself could be threatened.

As I begin my term at this important juncture, I ask a few questions to both myself and to all POSCO employees.

Do we still have the same passion and sense of duty that we used to have toward the nation’s economic development?

Do we still have our spirit of embracing challenge, embodied in our slogan “Resources Are Limited, Creativity Is Unlimited”?

Is our spirit of self-sacrifice still alive in placing our company and our country before ourselves?

Fellow colleagues,

As members of POSCO sharing the same fate, none of us are free from the current crisis. We all have to avoid living off of past glory. We must now dedicate ourselves to a fresh start and a new direction.

As of now, there are a number of urgent issues that we must resolve.

While the global economy is expected to remain stagnant for the time being, the steel market has long suffered from serious oversupply. Under such circumstances, we can no longer resort to our traditional competitive edge.

Meanwhile, our global expansion projects, once enthusiastically promoted, have yet to be settled. What concerns me even more is these projects may become a burden to the company depending on how the market unfolds.

Members of POSCO,

I would like to take today`s inauguration ceremony as an opportunity to declare our new corporate vision, “POSCO the Great.”

“POSCO the Great” refers to a POSCO that continuously contributes to the country`s economic development and is ultimately loved by the Korean people. We can achieve this goal through the following three values – Creativity, Harmony, and Top class management.

“POSCO the Great” also refers to a POSCO respected internationally by consistently creating new customer value and growth engines based on steel, POSCO’s core strength.

Today, I propose the key program of “Innovation POSCO 1.0” that will drive our corporate vision of “POSCO the Great.” The “1.0”  in “Innovation POSCO 1.0” represents being New, being Unified, and being No. 1.

“Innovation POSCO 1.0” aims to create customer value through “New” ideas, “Unifying” all of its members under the same vision, and with POSCO being the world’s “No. 1” company in all its business sectors.

Respected members of POSCO!

“Innovation POSCO 1.0” is an urgent plan to swiftly overcome the current crisis, but more importantly, it is a plan to prepare for the 50 years ahead of us.

Under the “Innovation POSCO 1.0” program, we have four initiatives.

First, we will fundamentally strengthen the core competitiveness of the steel business through technology-based solution marketing.

We will launch a Product Solution Center within the Steel Business Division to preemptively respond to potential needs of our customers.

We will fortify our status as the global top supplier in our seven key product domains which include steel products used in the energy industry; this emulates our past achievement of securing global leadership in the ultra-light automotive steel business.

We will transform Pohang and Gwangyang Steel Works into the world’s most competitive manufacturing sites by further intensifying our unique innovation capabilities and rooting out all the safety and environmental risks.

Overseas steel projects in regions such as India and Indonesia will be stabilized as early as possible by actively cooperating with partnering companies based on our spirit of shared growth and prosperity.

Second, we will nurture future mega-growth engines through strict selection and concentration among our non-steel business segments.

New projects currently being pursued in the fields of materials, energy, and other various areas will undergo a rigorous process of re-evaluation.

Our business feasibility assessment based on technology and market competitiveness yielded the tentative result of  “core materials” and “clean energy” as our potential mega-growth engines.

“Core materials” are essential ingredients for future high-tech industries, with Nickel and Lithium as promising candidates.

In the area of “clean energy”, technology in response to global warming, fuel cells and clean coal chemicals are promising candidates.

Just as we used steel, “the Rice of Industry”, to lead the economic development of Korea, we will usher in the new era of “Creative Economy” by generating more jobs in the sectors of “core materials” and “clean energy.”

Third, we will streamline our business structure and significantly improve the financial soundness of POSCO.

To maximize the synergy in each business segment, we will manage our key subsidiaries more effectively while massively trimming out non-core businesses.

Rather than pursuing expansion-oriented investments, we will adhere to high value-add investments, which will have a profound positive impact on our enterprise value.

We will move to lower the risk on our ongoing investments by inviting and cooperating with strategic and financial investors.

As for the suitable subsidiaries, we will file for an IPO at an appropriate time depending on the capital market situation. Our equity holdings in subsidiaries could be reduced to secure sufficient liquidity.

Furthermore, we will strengthen our communication with the capital market so that we can earn trust from investors.

Fourth, we will overhaul our management infrastructure such as organization, systems, processes, and corporate culture.

We will ensure that our organization will function more efficiently by downsizing the current six divisions into four divisions and simplify organizational hierarchy to streamline the decision making process.

In addition, we will curtail the number of executives in supporting departments, and some of the back office employees will be relocated into the value creating front line such as marketing, production and overseas sites, thereby producing higher financial outcomes.

Any employee who has generated additional profits by proposing and completing a challenging project will be given corresponding incentives.

We will also discard the “insider-only” practice and “the sense of superiority” that have been prevalent in POSCO as remnants from the legacy of a steel monopoly.

Meanwhile, we plan to further upgrade POSCO’s proud tradition of sharing activities so that we can fulfill our responsibility as a corporate citizen.

Fellow colleagues!

We are about to embark on a grand journey toward “POSCO the Great.”

Although we are facing a steep cliff to our rear and a fierce storm to our front, we do not have the luxury of hesitation because time is not on our side.

Fortunately, the path ahead of us is not all too unfamiliar to us.

Engrained deep within our DNA are the memories of great achievements during the days where we thrived without any capital, technology, and experience.

For the future of a reunified Korea and for another 50 years of POSCO, let us fortify the stepping-stones so that our next generation can continue to build upon the history of “POSCO the Great.”

When “POSCO the Great” is finally realized where POSCO is loved by the Korean people and respected by the citizens of the world, we will later look back to the cliff and storm of today and see that these were only part of a short-lived prelude to the great achievement of our vision for the future of POSCO.

Let us embark this new journey together for our greater POSCO.

I express my deep gratitude to the members of POSCO who have dedicated themselves in our operations, with their trust in management. I pay tribute to your loyalty to the company.

Whenever we have faced difficult times throughout our 45-year history, our management and employees have fought together, in unity, to sail through each and every hardship. I am strongly convinced that we can overcome today`s crisis based on our triumphs of the past.

Last but not least,

I give you my firm commitment.

To our customers, suppliers, and partners, we will bring you mutual growth in return for your steadfast support.

To the shareholders and investors, we will reply with higher profits in return for your unwavering trust.

To the communities and the Korean people, we will respond to your warm encouragement by making POSCO your pride and joy.

Thank you. (End) [/showhide] [/box]