The influence of James played a significant part in my decision. He served as the CEO for decades, enabling Golden Gate to grow into a global investment bank.
When you think about it, a leader doesn’t necessarily need outstanding talents; rather, it’s more crucial to place exceptional individuals strategically.
Despite entering the automotive industry with skepticism towards electric cars, CarOS wouldn’t have dared to take the leap without possessing core technologies.
CarOS excels in artificial intelligence, autonomous driving, and automotive OS. To stay ahead, CarOS needs to take the lead in the industry, beyond outsourcing and collaborations.
Moreover, CarOS is a U.S. company, and Daryl is an American. It would be more indicative of a U.S. automotive company if CarOS, a U.S. firm, acquires and operates it, rather than directly by investment firm OTK Company.
After listening to Daryl’s response, I spoke as if I had been waiting, “I will increase CarOS’s capital to $20 billion.”
When I acquired it, CarOS was barely worth $100 million. Thanks to advancing AI for automotive use, its value is now estimated at over $1 billion.
Yet, I declared to increase capital by 20 times that amount.
Sergei asked in bewilderment, “What about the stake ratio?”
The management holds a 14% stake, with each present here owning a small portion of CarOS.
“I will guarantee a 4% stake for the management.”
Despite increasing capital 20-fold, the stake ratio decreases to just under one-fourth. This signifies a significant increase in stake value, over five times its previous worth.
A 4% stake in a $210 billion company is inherently more valuable than a 14% stake in a $10 billion company, isn’t it?
“Any objections?”
No one opposed.
With the company swiftly surpassing $20 billion in value and stake value multiplying, there was no reason to object.
I looked around at the executives and said, “All of you here will lead the U.S. automotive industry. Please continue to do well as you are doing now. I will also spare no support.”
And I added one more thing, “Oh! Please keep my identity as the CEO of OTK Company a secret for the time being.”
***
After the executives left, only Daryl remained.
“I didn’t expect you to make such a decision.”
“I’m sorry. I should have consulted with you beforehand.”
I reached out my hand to him and said, “I will continue to rely on you in the future.”
Daryl’s eyes sparkled as he said, “I will definitely repay your trust.” Taek-gyu spoke in Korean, “Isn’t this the time when the owner should treat us to something?”
“Oh!”
It was an unexpected good suggestion.
“What should we treat them to?”
“Pizza for the Americans.”
I nodded, then asked Daryl, “As a gesture of encouragement, I would like to buy pizza for the employees. Is there a good pizza place nearby?”
Without hesitation, Daryl replied, “They say M Pizza is the best in Silicon Valley.”
Upon hearing this, Taek-gyu was surprised, “That’s the company we invested in.”
“Exactly.”
Starting in Silicon Valley, M Pizza is expanding its branches not only throughout California but also into other states.
If we’ve come this far, might as well try it, right?
Daryl immediately gathered the employees through an internal broadcast. They stopped their tasks and assembled in the lobby on the first floor.
There, Daryl announced the decisions made in the meeting just before.
“Under the support of OTK Company, Carlos has decided to acquire a car company and produce cars directly! From now on, we will lead the global automotive industry!”
“Wow!”
His words were met with applause and cheers from the employees.
I installed an app on my phone to order M Pizza. Taek-gyu counted the gathered employees and spoke.
“I think we need to order about 200 pizzas.”
“······.”
Is there a discount for major shareholders by any chance?
***
Negotiations between OTK Company and the Michigan State Government began in earnest.
Naturally, the negotiations were led by Hyunjoo Noona.
In her role as the branch manager, Noona conducted negotiations with various matters with the state government officials.
Due to the presence of closed factories and ruins scattered throughout the Rust Belt, they had the upper hand in this situation.
Before starting the negotiations, Hyunjoo Noona made it clear:
“If the support is inadequate, we will make additional investments in other industrial areas near Lake Ohio, not in Detroit.”
Taking into account Detroit’s symbolism, the headquarters and key production hubs were planned to be located here, but it was acceptable to build other factories in different areas of the Rust Belt.
The Michigan State Government was desperate to reach an agreement to attract maximum investment. Various support measures such as free lease of factory sites, infrastructure expansion, and tax incentives were proposed.
With manufacturing plants, employment would increase, reducing the need for unemployment benefits. If the company makes a profit, corporate taxes can be levied, and income taxes can be collected from workers’ wages.
This could lead to the revitalization of the local economy, an increase in real estate values, and many other positive spillover effects.
While Hyunjoo Noona fiercely negotiated with the government, we continued to search for takeover targets.
There are many automotive companies and brands available for sale. Among them, the Big Three in the US are GM, Ford, and Chrysler. GM, in particular, has deep ties with South Korea. – “Yet, aren’t they struggling to compete with foreign cars in the domestic market?” – “Yes, they are.” Rumors even circulated about their withdrawal from Korea. GM denies it for now, but considering their closure of the Holden plant in Australia, it’s not an impossible scenario.
GM and Ford have approached us expressing their desire to sell poorly performing brands and factories.
We first focused on Chrysler. The Chrysler Group went bankrupt during the financial crisis but survived with bailout funds and later merged with Italy’s Fiat Group to become FCA(Group Fiat Chrysler Automobiles).
At the time of the merger, many expected significant synergies from the merger of the giant automotive groups. However, these expectations were not met.
Chrysler was acquired by the Daimler Group, which also owns Mercedes-Benz, at one point and has struggled in the European market alongside Fiat.
Would merging troubled companies bring any actual benefits?
“However, unlike other companies, it’s not about cost savings through platform sharing, and the operating profit margin is also on the lower side.
The CEO of the FCA group put the company up for sale, but even after three years, they have not been able to find a suitable buyer.
In fact, looking at the immediate sales figures, it wasn’t that bad.
However, struggling with deficits, the focus had to be on increasing sales rather than investing in the future, leading to almost no investment in electric cars and autonomous driving.
As a result, GM and Hyundai, who initially showed some interest, completely dropped the idea of acquisition. It was at this point that we stepped forward with our intention to acquire.
We first made a move to acquire Chrysler, which is based in the United States. Fortunately, the FCA group responded positively.
“And ask if they can throw in Maserati as well.”
“······.”
Are they selling well these days to be offering it?”
***
“There are limitations to negotiating only through phone calls and emails. Once the outline was somewhat clear, Hyunjoo personally flew to the United States. Ellie accompanied her on the business trip. They headed straight to Detroit to meet with the staff. We, who had finished our business in Silicon Valley, also decided to go to Detroit to join them.
“Can I ask you to book the tickets?” I inquired.
Henry shook his head. “There’s no need for that.”
“Why?”
“We’ve arranged a private jet at a nearby airport.”
Taek-gyu was taken aback. “Oh! A private jet!”
I was surprised as well. The US is nearly 100 times larger in area compared to Korea, relying more on airplanes than railway transportation. This is reflected in how most American tycoons own private jets. Ronald is no exception. As a real estate mogul, he traveled across the US in his luxurious private jet, gaining support from laborers rather than just the wealthy, an ironic twist.
Regardless, I had no idea that they had prepared a private jet for us. After packing at the hotel, we immediately took a limousine to the airport, with Henry accompanying us.
Feeling apologetic, I mentioned, “We could have gone by ourselves.”
In response, Henry smiled slyly. “No, my grandfather insisted on being there to watch and learn while you’re together.”
“Oh!”
If their goal was only to accompany us, it would have been enough to assign someone else. This was the reason why the grandson of the Golden Gate CEO was overseeing our trip.
Taek-gyu looked at me and said in Korean, “Do we have anything to learn from them?” I nodded.
“That’s the issue.”
Recently, due to the rising reputation of OTK Company, I’ve been perceived as a remarkable investor. While I have made some impressive investments based largely on foresight, I’m unsure if there’s much to learn for myself.
Perhaps it would be better to learn from Hyunjoo instead?”
Upon arriving at the airport, a private jet was already waiting with preparations complete, a Gulfstream model. The interior was decorated like a conference room, clearly designed for business purposes from the start. Taekgyu looked around in amazement.
“How much does something like this cost?”
“About 50 billion won.”
“Should we get one too?”
“It doesn’t matter, but would we have a use for it?”
It may be suitable for wide continents like the US, Europe, or Australia, but not so much in Korea. It would be convenient for trips to Jeju Island or Southeast Asia, though.
We sat facing each other at the table. After the turbulence ceased post-takeoff, Henry unfastened his seatbelt and spoke.
“Would you like a glass of wine?”
“Don’t you have any beer?”
Henry hesitated at Taekgyu’s words.
“I actually prefer beer over wine.”
We each grabbed a can of beer. I had thought about having a drink with Henry for a while now, and it worked out perfectly.
“Cheers!”
At Taekgyu’s exclamation, we clinked our cans together.
As I sipped my beer, I asked Henry, “What kind of person is your grandfather?”
Henry proudly replied, “He is a truly remarkable person. Aside from being my grandfather, I personally respect him greatly.”
I nodded in agreement, “Likewise. It’s no exaggeration to say that his role has been significant in the growth of Golden Gate.”
Henry seemed eager to converse with us, sharing various stories. Henry had naturally developed an interest in investment from observing his grandfather since childhood.
Consequently, he graduated from Harvard with a degree in Philosophy and completed an MBA to pursue a path in investment.
Taekgyu posed a question.
“I was interested in investing, why did you major in philosophy?”
“My grandfather said that investment should start with understanding people. In order to do that, philosophy should be the foundation.”
The biggest reason good policies fail is because they fail to resonate with people. The same goes for why good investments fail.
The market doesn’t move based on cold logic and judgment, but rather a mix of people’s fears and irrationality.
Seeing the truth amidst all that is not an easy task.
You need to have both cold logic and animal instincts, sometimes relying on logic and sometimes on instincts to adapt to market changes.
However, in situations involving money, neither reason nor emotion works properly. Why would a perfectly sane person lose their mind and bet in a casino?
“Does your father work at Golden Gate too?”
Henry shook his head in response to my question.
“No, my grandfather said my father lacks talent in investing. He also wasn’t really interested. He’s currently working as a professor at a university.”
“What about you then?”
Henry smiled again. “Fortunately, I was told I have the qualities to be an investor.”
So, are they grooming you to take over? Perhaps Henry could become the CEO of Golden Gate in the future.
“I have one question.”
“What is it?”
“Do you really think Ronald will become the president?”
I asked this because you still believe Diane has the upper hand, right? Despite the comeback in Detroit, it’s a fact that Diane still has higher support.
I laughed.
“No matter what happens this year, it won’t be surprising.”
Before we knew it, empty beer cans had started to pile up in front of us.
As we exchanged various conversations, the view of Detroit outside the window came into sight.
Gogo