Frank Ahrens was a reporter at The Washington Post for 18 years when he got the proverbial offer that he couldn’t refuse. He accepted a job as director of global communications for Hyundai, becoming the highest-ranking non-Korean to work as an executive for the company. He chronicled his three years in South Korea, and his views on the economy and the business of Hyundai in his book, Seoul Man: A Memoir of Cars, Culture, Crisis, and Unexpected Hilarity Inside a Korean Corporate Titan. He discussed his book on the Knowledge at Wharton show, part of the Wharton Business Radio network on SiriusXM channel 111.
Knowledge at Wharton: Explain how you went from The Washington Post to South Korea.
Frank Ahrens: Well, I always say that’s what happens when you marry a diplomat. My girlfriend at the time was applying for the U.S. Foreign Service. She got her first posting to Seoul, South Korea, to the U.S. Embassy there. We decided we would get married and go together. I was at The Washington Post, and that was the pre-Jeff Bezos era. I was a business reporter at the time covering the publishing industry, and I was reading the Post quarterlies. I saw how things were going and figured it was a good time to make a career change.
Many journalists go into public relations. It’s not an unnatural transition. I had about nine months to look for a job before Rebecca, my wife, was posted to Seoul. I started making a lot of calls, and one call led to another call and another call, and I found out the head of global PR for Hyundai Motors in Seoul was retiring. I sent my resume in and bang, a few days later I was interviewing with Hyundai.
Knowledge at Wharton: You arrive there with your wife, and your first impressions of the country and working for this company are what?
Ahrens: When you arrive in Seoul, it’s 12 million people and about 20 million in the metro area. If you’re familiar with large global cities, it looks from the air, and from first go on the ground, pretty familiar. But we had several foreign service families who we became friends with, and one of our sponsors said right away, “Welcome to Korea: The Land of Almost-Not-Quite.” What they meant was, on first glance to a Westerner, Korea and Seoul can seem very familiar. It seems like a big city you’ve been in before. But then everything is not quite the same. It’s these little “not quites” that sort of compile and compound on you. That can lead to some initial frustration as you try to navigate the differences.
Knowledge at Wharton: How do you encapsulate the culture of working for Hyundai, which is a well-known brand?
Ahrens: Corporations, by their nature, have traditionally been hierarchical. That’s just how they are. But when you go to east Asia, to Korea, to Japan, to China, you layer Confucianism on top of it. Or maybe it’s better to say it’s underlying it all. Confucianism is a way of ordering society. It’s obviously based on the late, great ancient Chinese philosopher, Confucius. It was about ordering society and creating a very strict hierarchy in society based on birth, based on gender, based on age.
“Management is a science, and it’s a respected field, and learning to manage people is hard. You can’t just jump into it.”
Respect for elders translates to respect for superiors. There is always a superior and a junior in every relationship. Sometimes you’re the superior, sometimes you’re the junior. You have to learn what it means to work in a Confucian culture. If you apply Confucianism on top of a typical hierarchical corporate structure, then you’ve got extra hierarchical things you have to deal with. For somebody who came from a newspaper newsroom, which is horizontal at best and anarchy at worst, it was a whiplash for me to learn to deal with it.
Knowledge at Wharton: You put on the inside of the book jacket, “Formal-by-day, crazy-by-night Asian business world.” What does that mean?
Ahrens: In the U.S., in the West, even in big corporations, they’re not the most strictly formal. The way you behave at work is not terribly different from the way that mature, grown-up adults behave outside of work. In a Confucian culture, in Korea and at Hyundai, it was literally night and day. Daytime in an American newspaper, I was used to there being an atmosphere of bonhomie. You walk around, you trade gossip with people, and its conversations back and forth.
The Hyundai office that I was in was pretty quiet. People were diligently sitting at their desks and doing their jobs. If there were meetings, they were about work only, and you’re not encouraged to stand around and gossip and talk about nonwork functions because when you’re at work, you’re at work.
That was the daytime. But then at night, it’s just letting the dam break loose because there’s so much pressure during the daytime. It’s the classic work hard/play hard idea that we have in the West, except even more so. The typical evening has round one, round two, round three and so forth. Round one is a dinner, a Korean barbecue dinner with lots of barbecue around a common table, with everyone picking pieces of sizzling meat off with chopsticks.
You’re all toasting each other with shots of soju, which is the liquor of Korea. It’s about 20 percent alcohol. More soju and more soju, and after two hours of that, everyone heads to karaoke, which in Asia is no joke. It’s part of the evening’s entertainment. After that, there could be another round and another round. And this is a business dinner. When we would bring journalists from around the world to Hyundai, we would take them out for these sorts of dinners. For a Westerner not used to it, man, it can just be exhausting.
Knowledge at Wharton: Especially when you have to get up the next morning at 6:30 or 7 a.m. to head in to work.
Ahrens: I could be in to work by 7:15 and my bosses and half my team had already been in a half an hour.
Knowledge at Wharton: Outside of understanding the culture, what were some of the other big changes you had to make working there? When you’re the head PR guy for an international automaker, you’re one of the top 15 or 20 people in that company.
Ahrens: Journalists talk a lot about the fact that when they move into PR, they have to learn to be an advocate. When you’re a journalist working at a newspaper, you are not necessarily working in the best interest of your employer. When I was covering The Washington Post, I wrote stories that were, frankly, not in the best interest of my employer if I had to write about them. If they had poor quarterlies, that sort of thing. But at a corporation, you work in the best interests of your corporation. That’s a mindset that I really had to get used to.
“When you’re in the auto industry, you never root against the industry leaders.”
Another thing journalists have to get used to when they move into a position like that is managing people. Journalists can often make fun of managers and management. They lampoon the middle manager and all the gobbledygook management-speak. Well, that’s no joke. Management is a science, and it’s a respected field, and learning to manage people is hard. You can’t just jump into it. I learned that. Not to mention managing people from a Western point of view, mistakenly, in an Eastern culture.
For instance, one of the big problems that my colleagues had was what to call me. At Hyundai and in the Confucian culture, you refer to your boss by last name and job title. I was a director. Director in Korean is ee sa. So it would be Ahrensu ee sa. But I screwed everything up by trying to tell people, “Hey, call me Frank.” Because I’m a Westerner. I’m trying to level things a little bit.
That just blew everything up. It made them uncomfortable, and they didn’t want to call me Frank because, in their minds, that made the director of their team of less esteem than directors of other teams. They felt like they might be working for something of a lesser director because he was so informal. You have to figure out those things from the jump. I was six months in. It was thanks to a couple of junior members of my team who spoke great English, who had lived in the U.S. a bit, that saved me from probably getting sacked those first few months.
Knowledge at Wharton: Now that you’ve had that experience, how does it change your mind-set about working in the United States? Were there things that you learned that you were able to assimilate into working here, or was it the end of one experience and you move on?
Ahrens: There was a ton to learn. I think probably the biggest thing to learn, and this is applicable across all cultures, is trying to see something as the person on the other side of the table sees it, not the way you see it. Here’s a quick example. Right before I left Korea, I was having dinner with my team. I wanted some napkins, and they were in front of one of the young women on my team to the left of me.
I said, “Can you please pass me a napkin?” She gave it to me. She had lived in the U.S. for about a year as a student. She said, “Did you ask me to pass you the napkin because in your culture it’s considered rude to reach in front of somebody who’s eating?” I said, “Yes, that’s right.” She said, “In our culture, it’s considered rude to interrupt somebody while they’re eating to ask them to give you something.” Here were two people from two cultures doing what they believed was the most polite thing, and in fact doing the rudest thing they could do.
The way I came to think about it was the glass test. If you set a drinking glass down on a table between an American and a Korean, they both see a glass. They see the same thing, but it means something different. The American thinks, “Here’s a glass. It will soon provide me with a refreshing beverage.” The Korean sees the glass and says, “Here is a glass. If there is a superior, a senior, sitting at my table, I must fill it and serve him.”
Knowledge at Wharton: That’s a hard thing to get used to. In terms of Hyundai’s status in the South Korean economy, I would guess it is well up there in the pecking order?
Ahrens: Oh, massive. In South Korea, you have what’s called a chaebol, which is Korean for “family-owned conglomerate.” That is the style of the big businesses there. Family-owned conglomerate businesses are not unusual in the West. We have News Corp, we have The New York Times, etc. In Korea, they are so large, and Korea itself is so small – about 50 million people – they have an impact on the country that has not been seen in the U.S. since the days of Getty and Rockefeller 100 years ago.
In 2012 or 2013, if you put together the Samsung chaebol and the Hyundai Motor Group chaebol, those two conglomerates accounted for 50 percent of all the earnings on the Korean stock exchange. After that, you’ve got LG and other big ones like SK Telecom and so forth. Each of these chaebol is made up of 20, 30, 40 businesses. Many are related to the main business, but not always…. The impact is extraordinary.
Knowledge at Wharton: What do you see as the future for Hyundai? It has been a solid rise for that company as an automaker here in the United States. When they first got started, most people figured it was just a low-end vehicle. They’ve changed that and are trying to get more luxury in their vehicles right now.
Ahrens: One thing to remember about Hyundai is that they only started the car company in 1967. It’s a pretty young company. They only hit the U.S. in the ‘80s. For the first 10 or 15 years here in the States, they were kind of a joke. They were cheap and poorly made, and they really reached their nadir here in the late ‘90s. But then the current chairman took over from the founding chairman, his father, and said, “We must make a commitment to quality.” Throughout the 2000s, they made a significant commitment to creating high-quality cars. In the most recent initial quality survey that came out a couple of months ago, Kia was No. 1, Porsche was No. 2, and Hyundai was No. 3. Not bad.
The aspiration they have now is to take their vehicles upmarket. Just a few months ago, they split off their top two vehicles, the Genesis cars, to create a separate luxury line like Lexus and Acura. The plan is to continue to elevate the entire brand. The endgame is that they want their most expensive cars to be as good as Audi and their least expensive cars to be as good as Volkswagen. Pre-Volkswagen scandal.
Knowledge at Wharton: Do you think that they can do that given the wide range of cars and number of automakers here in the U.S.? When you’re talking luxury, you’re paring it down a little bit. But even some U.S. automakers have tried to up their game in the luxury market and produce cars that have a price point in the $50,000 and $60,000 range.
Ahrens: It’s difficult. The new, second-generation Hyundai Genesis is meant to compete against the BMW 5 Series and the Mercedes E-Class. It runs the road with those guys in terms of performance and features and so forth, but it comes in $15,000 to $20,000 cheaper. That’s one thing that Hyundai’s going to do.
Now, are you going to get the brand snobs who want to pay an extra $20,000 to get that 3-pointed star on their hood? No, you’re not. But you are going to get, I think, a smart luxury and premium consumer. Hyundai’s market share here is 4.5%, 5% or so, so there’s room to grow. The thing that has dinged Hyundai over the past year and a half is having a sedan-heavy lineup. Everyone in the U.S. now wants a CUV or an SUV. They did great with their last-generation Sonata and Elantra when those segments were very hot, but now everyone wants a little SUV. They’ve got more vehicles in the works, but they’re a little late to the game on that and have to catch up.
Knowledge at Wharton: How much is a company like Hyundai affected by what happened with Volkswagen
Ahrens: It’s interesting, because when I was at Hyundai, we had our own sort of mini scandal. In 2012, we had to restate mileage estimates on a few hundred thousand vehicles, dropping them an average of about 2 miles per gallon. As you may know, the U.S. is the only country in the world where the government doesn’t test vehicles. It gives guidelines to the manufacturers, they test it, submit it to the Environmental Protection Agency, and the EPA does random checks. The guidelines are tough, but there’s a lot of wiggle room in there for what they call “engineering judgment.”
In the EPA’s check, they estimated that one of the tests that Hyundai ran was not up to their guidance. So, we had to shave a couple of miles per gallon off of a few cars. As soon as we announced that, we announced debit cards for all the people who had bought those cars, and it was free gas to make up for that.
When you’re in the auto industry, you never root against the industry leaders. Volkswagen is a mighty brand. They are tremendous makers of vehicles. You never have schadenfreude with the industry leader because you never want to see them go down. But the scandal that Volkswagen is still undergoing is just epic and completely unexpected.
The thing that was amazing about it was that every other automaker is doing diesel cars. They have this one way of making the engineering work, and Volkswagen had another way. They weren’t using that way, and none of the engineers could figure out how VW was doing it. With our engineers, the impression was, “Well, they’re VW. Their engineers must be just better.” That was the myth around VW engineers. We find out now that it was a cheat, and they’re having to pay the price for it.
“Even though it’s sort of a dark horse pick, I like to push my chips on to Korea.”
The Korean government is engaged in legal action with the VW cars that have been sold there. Remember a few years ago when Toyota had the unintended acceleration issues? They were dinged, they got a lot of bad press for a year, they had a big fine to pay. But within a couple of years, they’re back to No. 1 globally. VW’s fines are going to be much larger, and it’s going to be ongoing, but it certainly has an impact for every other automaker. There’s just additional scrutiny by the consumer on automakers’ claims now.
Knowledge at Wharton: You talk in the book about South Korea’s position in the Asian economy. China economy is seemingly a daily story now, and Japan is always on the radar for the growth that they have. Where does South Korea fit into that mix?
Ahrens: Even though it’s sort of a dark horse pick, I like to push my chips on to Korea. I say this for a couple of reasons. First off, it’s a democracy, like Japan, is and like China is not. That puts it one step ahead in terms of innovation, press freedom and stability. Unlike Japan and China, Korea has great relations with its regional neighbors. There’s no antagonism with the South China Sea Islands and things like that. It has an incredibly well-educated populace. And because it developed about 15 years after Japan, it has watched the Japan stagnation over the past 20 years, and I think Korea has taken notes.
Korea understands that it can no longer rely completely on the chaebol, which are like the zaibatsu in Japan — the huge brands, Panasonic and Sony, that can tend to ossification over many years. If you just rely on these companies, you’re really putting all your chips in one area. So Korea needs to create a more risk-taking, venture capital, startup-style, service economy. I think Korea has the understanding it needs to make that pivot.
Finally, and this is sort of an unexpected thing, there’s the wild card of North Korea. North Korea is a thuggish, Stalinist regime that exists only to continue to exist. It will fall one day. It could be five minutes, it could be 15, 20 years from now. Who knows? And who knows how it will collapse. But when it does, it will become a unified Korean Peninsula, and that will be under the rule of Seoul. South Korea will be Korea.
“North Korea is a thuggish, Stalinist regime that exists only to continue to exist. It will fall one day.”
Now, the absorption of 20 or 22 million lesser-educated, lesser-nourished people into the world’s 10th or 12th largest economy is going to be a burden for a couple of generations, just like it was with East and West Germany. But more so because the East Germans were well-fed and well-educated. This is going to be more of a burden.
However, it will give South Korea access to natural resources, which are mainly in the north part of the peninsula. It will reduce their net imports of natural resources. It will give them a workforce of people who do lower-skilled jobs, which South Koreans don’t want to do now and are currently importing Indonesians and Filipinos and Vietnamese and others to do.
The North Koreans are younger and have more children. South Korea, like many mature societies, is an aging population that’s not having as many children. So, this will be a bit of a salve to the demographic bomb. It’s not going to be easy for a couple of generations, but I think in the long run, it will certainly benefit the country.