Tag: South Korea

OM in the News: The Mercedes-Benz EV on Fire

It took just seconds for an underground South Korean residential parking lot to be engulfed in flames. The culprit: a Mercedes-Benz EQE electric vehicle that had not been charging.

The blaze incinerated dozens of cars nearby, scorched a further 140 vehicles and forced hundreds of residents to emergency shelters as the buildings above the parking lot lost power and electricity. Nobody died, but the fire took eight hours to extinguish. Cars with internal combustion engines are more likely to catch fire than EVs. But when EVs do burst into flames, the rechargeable lithium-ion batteries get hotter and the fire takes longer to stamp out, writes The Wall Street Journal (Aug. 8, 2024).

In recent years, General Motors recalled tens of thousands of its Chevrolet Bolts in the U.S. over risk of battery fires. Hyundai pulled roughly 80,000 electric sport-utility vehicles after roughly a dozen caught fire. Last September, a Nissan Leaf ignited while charging in Tennessee, and the fire required more than 45 times the water needed for a gas-powered-car fire to be extinguished.

Automakers have grown more cautious about EV launches amid modest demand. Sales of fully electric models in the U.S. rose 6.8% through the first half of the year, a sharp deceleration from near 50% growth in 2023.

The perceived risk of EVs is particularly acute in tightly packed South Korea, a country about the size of Indiana with 52 million people. Outdoor residential parking lots are relatively uncommon. The nation’s ubiquitous high-rise apartments often feature underground parking, where firefighters must contend with restricted access. The country had already been on edge about battery-related fires, after a blaze at a lithium-battery factory in June that killed nearly two dozen people.

In recent days, LG Display recommended that employees at its main factory complex park their EVs outside. The country’s main international trade association, whose offices are located in central Seoul, said it would accelerate plans to relocate EV charging ports to its aboveground lot. One of the country’s largest telecommunications firms, KT, has held discussions about barring EVs from parking underground.

Classroom discussion questions:

  1. Which of the 10 OM decisions in your Heizer/Render/Munson text deal with this issue?
  2. What are the OM implications of the South Korean fire?

OM in the News: Understanding South Korea’s Chaebol System

The heads of South Korea’s most powerful chaebol companies at a recent parliamentary hearing in Seoul as part of a corruption inquiry.
The heads of South Korea’s most powerful chaebol companies at a recent parliamentary hearing in Seoul as part of a corruption inquiry.

I was just chatting with my coauthors, Jay and Chuck, about our coverage of keiretsu networks in Chapter 11, Supply Chain Management. We don’t mention the somewhat similar system of interconnected companies in S. Korea in that chapter, but the New York Times (Feb. 18, 2017) just published an article called “Inside the Chaebol of S. Korea” that is worth sharing. Chaebols, a handful of family-controlled companies dominate economic life in South Korea. Some, like Hyundai, LG and Samsung, are well-known outside their home country. But domestically, they all wield immense power — and are coming under increasing scrutiny. The word comes from the combination of the characters for “rich” and “clan.”

Chaebol are generally conglomerates of affiliated companies. LG, for example, makes smartphones, televisions, electronic components, chemicals and fertilizer. It also owns Korean baseball and basketball teams. Hyundai, which makes the Hyundai and Kia cars, also makes elevators, provides logistics services, and runs hotels and department stores.

Chaebol rose from the ashes of the Korean War. After the conflict ended, officials steered relief funds and cheap loans to businessmen who promised to rebuild the country. The government also protected homegrown industries from foreign competition to help them develop. The recipe proved to be potent: Chaebol played a major role in South Korea’s rise as an industrial giant in the following decades.

But the recipe also created imbalances. Money meant for the common people often ended up in the hands of the wealthy families, creating resentment that lingers to this day. Chaebol became sprawling businesses that held a nearly 2/3 market share in S. Korean manufacturing by the end of the 1990s. The Asian financial crisis at that time stirred worries that the cozy relationship between chaebol member companies could lead to severe damage across multiple businesses and supply chains if one failed.

Classroom discussion questions:

  1. What is the difference between Japan’s keiretsu networks and S. Korea’s chaebol?
  2. Why is chaebol a potential supply chain issue?