Blowing the whistle in South Korea: Hyundai Man takes on chaebol culture

[May 15, 2017]  By Hyunjoo Jin

YONGIN, South Korea(Reuters) - South Korean engineer Kim Gwang-ho flew 11,000 km (7,000 miles) to Washington last year to do something he never dreamed he would: he reported alleged safety lapses at Hyundai Motor Co - his employer of 26 years - to U.S. regulators.

Citing an internal report from Hyundai's quality strategy team to management, Kim told the U.S. National Highway Traffic Safety Administration (NHTSA) the company was not taking enough action to address an engine fault that increased the risk of crashes.

Hyundai <005380.KS> denies the allegations. The company promotes openness and transparency in all safety-related operations, and its decisions on recalls comply with both global regulators and stringent internal processes, Hyundai told Reuters in an emailed statement.

Reuters was unable to review the internal report cited by Kim due to a court injunction filed by Hyundai.

In a culture which values corporate loyalty, Kim was moving against the tide when he handed the NHTSA 250 pages of internal documents on the alleged defect and nine other faults.

South Korea has been buffeted by corporate scandals, many within its family-run conglomerates or chaebol, but has seen few whistleblowers. A high proportion are sacked or ostracized, despite legislation to protect them, according to advocacy groups.

Kim, fired in November for allegedly leaking trade secrets about the company's technology and sales to media, has since been reinstated by Hyundai after a ruling by a South Korean government body under whistleblower protection laws.

Hyundai has filed a complaint disputing the decision.

"I will be the first and last whistleblower in South Korea's auto industry. There are just too many things to lose," Kim said in an interview at a bakery cafe run by his eldest daughter.

"I had a normal life and was better off, but now I'm fighting against a big conglomerate."

Corruption at chaebols is at the forefront of the political agenda for newly elected president Moon Jae-in, voted in after a bribery scandal involving Samsung chief Jay Y. Lee and former President Park Geun-hye.

LOYAL SALARY MAN

On Friday, Hyundai and associate Kia Motors Corp <000270.KS> said they would recall a further 240,000 vehicles in South Korea after the transport ministry issued a rare compulsory recall order over defects flagged by Kim.

Kim, now 55, says he did not start off intending to blow the whistle.

A loyal salary man, he studied precision mechanics and joined Hyundai in 1991, working on engine testing and planning.

In 2015, Kim transferred to the Quality Strategy team, which decides recall issues.

That same year, Hyundai announced a U.S. recall of half a million Sonata sedans due to manufacturing flaws that could result in engine stalling.

Kim Gwang-ho speaks during an interview with Reuters in Yongin, South Korea, April 19, 2017. Picture taken on April 19, 2017. REUTERS/Kim Hong-Ji

Citing the report by the Quality Strategy team, Kim argues Hyundai knew the issue was more serious and widespread, affecting more models and the South Korean market. The problem was not just with the manufacturing process but also engine design, meaning Hyundai would need to fix engine in all the affected cars, at a steep cost, he said.

Hyundai rejected those claims, saying it was closely monitoring the issues brought up by Kim both before and after he raised them.

"Hyundai has taken appropriate steps to ensure safety, quality and compliance with applicable regulations in our markets, including all recalls Hyundai has conducted to date,” Hyundai said.

FAMILY SUPPORT

Kim shared his misgivings with some local media and South Korean regulators after his tip-off to the NHTSA. One transport ministry official said that led Hyundai to investigate and recall vehicles in South Korea.

Last month, Hyundai and Kia announced a recall of 1.5 million cars in the United States, Canada and Korea due to the engine stalling risk, at a cost of 360 billion won ($318 million). NHTSA declined to comment on whether Kim's complaints led to the U.S. recall.

NHTSA said it is reviewing Kim's materials and "will take appropriate action as warranted". It did not elaborate on the actions, which could include imposing penalties on Hyundai.

Kim has also paid a price. His house was raided by police investigators in February who seized documents and his hard disk, he said.

Police said a probe into Hyundai's complaint against Kim was ongoing.

Before being reinstated to his job, Kim was relying on savings and loans to support his family.

"At first my wife asked me not to do it. She was worried about living costs if I'm fired. But I'm stubborn, and persuaded her that the problems will be buried forever without my confession," Kim said.

(Additional reporting by David Shepardson in WASHINGTON; Editing by Miyoung Kim, Clara Ferreira-Marques and Lincoln Feast)

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