BEIJING - The
negative impact of the bribery scandal surrounding
South Korean automobile manufacturer Hyundai is
becoming apparent on the Chinese auto market.
The lack of response from Hyundai
headquarters to the scandal will probably
undermine global sales and, as one of the most
important markets for Hyundai automobiles, China
is doomed to suffer, a Chinese car dealer, who
only agreed to disclose his surname as Jia, told
Xinhua on Sunday.
Hyundai chairman Chung
Mong-koo was detained on April 28 as part of an
investigation into bribery allegations. Chung, 68,
is under suspicion of embezzling about 130 billion
won (about US$137.2 million) to establish a slush
fund for bribery and is
believed to have caused 390
billion won's worth of damage to the company's
interests. He also reportedly was involved in a
wide range of illegal schemes intended to ensure
that control of the company would pass to his son,
Chung Eui-sun, head of Hyundai affiliate Kia
Motors Corp.
A number of Hyundai's senior
executives have been arrested since prosecutors
raided the offices of Hyundai Motor and its
affiliates last month to seize evidence that
Hyundai Motor Group had created slush funds worth
millions of US dollars to bribe government
officials over the past several years.
Hyundai Motor Group is South Korea's
second-largest conglomerate and, together with its
Kia affiliate, controls more than 70% of the auto
market in Korea.
Hyundai's growth in China
has been rapid. Official statistics show that
Hyundai has so far signed 24 Chinese dealers and
85 maintenance outlets throughout the country.
Information from the company says that Hyundai has
set a target of occupying more than 20% of China's
auto market by 2010. The company has also tried to
develop China as a base for engine production,
particularly in Beijing.
"The
scandal, however, is a real test of our faith in
Hyundai," the dealer commented ironically.
According to an insider with the Hyundai
Motor China office, the company has made very
detailed plans on imports into the Chinese market,
but "now the plans are on hold".
When
facing questions about the further handling of the
scandal from its Chinese partners, the Hyundai
Motor China office has chosen to remain silent. No
statement can be found on the company's website,
and the public relations department has declined
to comment on the issue.
Analysts believe
the scandal has significantly damaged the value of
the Hyundai brand in China, and furthermore, the
slow response or lack of response from the Hyundai
headquarters will surely worsen the situation. It
will also disrupt Hyundai's global market
strategy, which has led to the dealers' confusion
over the future market situation, analysts
predicted.
"It's just like someone getting
sick - the pain in the head will affect the hands
and legs," Jia said.
At the same time, the
panic among Chinese dealers shows that the
economic relationship between South Korea and
China has become very close and the Chinese market
has become very sensitive to any good or bad
Hyundai news in South Korea, Jia said, expressing
his hope that the issue could be settled "sooner
rather than later" so as to reduce the negative
impact "to the minimum level".
