Rumours abound of potential capital raisings by LG Electronics and LG Philips LCD. In this interview LG Electronics CFO, YS Kwon would confirm none of the reports. Instead Kwon talks with frankness about corporate governance, gives strong guidance on whether it will bail out LG Card and predicts how many players the TFT-LCD industry can sustain.

Note: After publication of this article on the morning of June 26, LG Electronics made two clarifications regarding comments on LG Card to make its CFO's meaning more precise. This version includes the changes.

There was a lot of reorganization in the LG Group last year. How does LG Electronics fit into that?

Kwon: Last year, April 1, we started our holding company, LG. Under this there are the sister companies, one of which is LG Electronics. Our major shareholder, the Koo family own a stake in LG's holding company and not in the sister companies. The holding company holds at least a 30% stake in the listed companies and 50% in non-listed companies.

By having this holding company structure we can resolve transparency issues. In the past we had issues with transparency just like other companies in Korea.

For example, both Samsung and LG have credit card companies. Our group has LG Card and theirs has Samsung Card. In the case of Samsung, the owner of Samsung Card is Samsung Electronics and Samsung Electric, with around 75%. And because of the financial difficulties of Samsung Card, Samsung Electronics and Samsung Electric should spend some money. But because of the holding company structure of LG, even though LG Card has financial difficulties, we at LG Electronics cannot participate in LG Card's rights issue. We are standalone companies. We can only invest in core businesses. That's a big change.

Are investors now rewarding you for this, or do investors still suspect there may be transparency issues?

Even though we have a holding company structure, some investors have concerns. They do not honestly believe LG Electronics will act on a standalone basis, but maybe next year they will see it is so. In the second half of this year, they will see that LG Electronics is very much an independent company.

What are your most pressing issues as CFO?

LG Electronic's finance structure is not as good as our competitors. On a consolidated basis we are weak and my priority is to reduce our net debt to equity ratio to below 100%. Currently it is slightly less than 200%.

Are you bringing down your interest costs through refinancing?

Yes, we're doing this through the bond market. We are trying to spread out our maturity rates to three to five years.

One of your subsidiaries is your 50% joint venture, LG Philips LCD. Most analysts think there are too many companies in the TFT-LCD space. How do you see the industry becoming profitable?

We are constructing a sixth generation fab and cost-wise that is much better than fifth generation and maybe seventh generation would be even better still.

Likewise, Samsung just opened a fifth generation fab.

Taiwanese manufacturers, however, might only operate fifth generation fabs this year. So there is at least a one-year gap between the Taiwanese companies and LG. So that is our strength.

The earlier you build, the better the profitability.

Do you feel there should be consolidation in the industry?

Yes, there should be. The Taiwanese manufacturers cannot survive by themselves. Only a few companies - AU and Chi Mei - succeeded in fundraising last year. The other companies didn't have the chance to raise the funds. So they are late in their investment, and without consolidation they cannot survive.

How many companies can the TFT-LCD space sustain?

Maybe five. Two Koreans, one Japanese and two Taiwanese.