Exclusive Revelations From Rahmi Koç

Rahmi Koç, the honorary chairman of Koç Holding, is continuing with the World Tour he started on 19 September 2004. He has completed the third stage and returned to Turkey. He is now preparing to embark on the fourth stage in September. He took time out from his busy schedule to answer Capital’s questions and evaluate a variety of subjects from his private life to the economy, Koç Holding and the EU. The most important statement was about the three Koç Group companies which are experiencing difficulties

Rahmi Koç is honorary chairman of Koç Holding, one of the leading groups in Turkey. He is coming to the end of the “World Tour” on which he embarked on 19 September 2004. As he was sailing across the Pacific in his yacht Nazenin he was very saddened by some news coming from Turkey. The date was 4 May 2005. The news was related to Migros’s purchase of shares in Gima. Even though an agreement had been signed and money expended, Rahmi Koç was shocked and saddened to see that Gima had been sold to Carrefour. But he says: “My colleagues were even more upset than I was.”

Rahmi Koç embarked on his epic voyage last autumn and took a break in the port of Auckland in New Zealand. He has thus completed the third stage of the journey. Now the yacht is being refitted and in September it will start out on the fourth stage of the journey. This is why he is in Turkey. He both is conducting business and overseeing the preparations for the yacht. He is also preparing his ‘yacht diary’.

The exclusive interview he gave us showed that Mr. Koç has not been isolated from what has been happening in Turkey. He sees the progress in the economy as very positive. He is very pleased by the increase in foreign investor interest following the December 2004 decision by the EU to begin accession negotiations. He stresses that the increase in foreign investment will continue. But he also notes that economic growth has not been reflected in a solution for unemployment or in improving the condition of the ‘man on the street’. He says that these are very serious problems.

Rahmi Koç answered our questions as follows:

How has Turkey changed in the period between when you started your voyage and now? What differences do you see in politics and the economy?

When someone is at sea then he can detach himself and look at Turkey from a different perspective. When one looks at everything in this way then the Turkish economy is not doing badly. But there are some non-economic areas which are not going well. Things are not going well in terms of concepts outside the economy and this troubles me.

Could you go into a little more detail about what is ‘not going well’? What are the developments in the economy, business and politics which you do not think are going well?

As far as I can tell, the situation in the economy is as follows. The economy has two locomotives: one is the construction sector and the other is automotives. They are going well. As a result, these two sectors will pull the others along in their wake.

But the upturn in the economy and boom in different sectors has not been reflected in the situation of the ‘man on the street’. The ‘man on the street’ is complaining that he has not benefited from this improvement. I think this is where the biggest problem lies.

Unemployment is continuing. One of the reasons for this is that, as companies, we have become used to working more efficiently. In the past we would employ more people. Then the crisis broke. We cut back and we became used to operating with these cutbacks. In fact, we even took them a little further. As a result, we are achieving the same output without reemploying the people whom we laid off.

This is a serious problem. We can only take on new people if there are new business opportunities. If not, then the existing business will not create employment as this productivity means that we are doing more work with less people.

At the moment, the overall situation of the country is good. We have seen that Turkey receiving a date from the EU has really whetted the appetite of foreign capital. But everything has become confused again and I don’t know what will happen there.

How is everything going in your group? How would you evaluate your performance?

With three exceptions, all of the companies in our group are performing well.

Which three companies are you referring to?

The three companies I am referring to are the following. As you know, we have a company which works in shipbuilding. I am talking about RMK Marine Gemi Yapım Sanayi. We bought it for a very important project. As you know, the state has a ‘national ship’ project. We bought the company for that project, to support it. But everything has been drawn out and dragged on for so long. So, in those terms, we have not done as well as we had expected.

Another company which has been experiencing problems is Beko Elektronik… In fact, it does not have any major problems. We are exporting and selling very well. But the profit margins have narrowed. Because making televisions means including everything, you bring it all together and you produce a product. I mean, it has become a commodity.

So how do you plan to overcome the problems with Beko?

My colleagues are working on this. We are thinking of perhaps overcoming the problems by making a smaller quantity of more expensive, more valuable products. That is what my colleagues say. I am just repeating that.

The third company is in the foodstuffs sector, Tat Gıda. As you know, we merged our foodstuffs companies. We brought Maret, Pastavilla, SEK Süt and Tat Konserve all together in Tat Gıda.

But we could not obtain the desired results from the merger. We have yet to create a synergy from the merger. But there is still a little more time to get results here.

You also know that we are now selling cigarettes. They imposed taxes on imported products in the cigarette business. In order for people to use less imported tobacco they began to apply the tax and changed the system. As a result, taste of the cigarette changed. Although I don’t smoke and wouldn’t know be able to tell. But sales plummeted as a result. But the people are slowly coming back. Apart from these, all of companies are doing well.

As things stand, are you planning any mergers, acquisitions or foreign partnerships between Migros and other companies?

To tell the truth, we are continually receiving offers and we are going and discussing them. I mean mergers, acquisitions and partnerships have been discussed for the last ten years.

Are there similar proposals and approaches for other companies in the Koç Group?

At the moment there are no such proposals. But we are considering acquiring other companies. First in Europe and then in China. Today it is very difficult to do business if you are not involved in China. China is expanding with an incredible competitive strength.

WE SHALL INVEST IN CHINA WITH FORD

What will you do in China? What will happen to the acquisitions made by Arçelik, Demirdökum and Beko? And then there is Demirdökum …

As you know, Demirdökum is already producing in China. Arçelik has a factory in Russia making refrigerators and dishwashers. Now we are going to produce trucks in China with Ford. Ford Otosan will supply the technology and we shall make trucks there. Some things are happening.

You will also participate in the privatization programme. Are you interested in Tüpraş as well as Telekom?

No, we not interested in Tüpraş. Telekom is on the table, as is Yapı Kredi. This is well known. In any case, our current resources are sufficient for these.

What do you think about Telekom. Do you think you will be able to get it?

We have set ourselves a price ceiling for Telekom. If the price goes above that then we have no chance. We have found a good partner and we shall submit a bid together. At the moment they are taking the specifications and then the bids will be submitted at the end of June. Others will follow. Erdemir will be next up and then there is Telsim.