Asia Times: Time for the Hyundai Group to take stock


	March 23, 2001	atimes.com

The Koreas

Time for the Hyundai Group to take stock

SEOUL - The death on Wednesday night of Hyundai Group founder Chung Ju-yung, who was 86, is expected to affect future stock prices of the South Korean conglomerate's subsidiaries, which traditionally have not been prone to excessive fluctuations in the market.

Chung' death is expected to cast a deeper shadow on the prospects of the financially troubled Hyundai Group, which although it has assets of 106 trillion won (US$802 billion) sank into an acute liquidity crisis last year in the wake of a severe sibling dispute over the control of the group's chairmanship.

Chung is survived by his wife, six sons and one daughter. His sons include the eldest child Chung Mong-koo, chairman of the Hyundai Motor Group, the fifth son Chung Mong-hun, the de facto chairman of the Hyundai Group, and the sixth son Chung Mong-jun, advisor to Hyundai Heavy Industries.

Analysts say that once investors get over the "shock" of Chung's death, market forces are likely to exert themselves more strongly and opt for proven performers over companies that have been carried along.

South Korean shares slid 1 percent on Thursday on foreign program selling after the Nasdaq's overnight fall. The Korea Composite Stock Price Index ended 5.54 points down at 527.05. Apparently affected by the weak Japanese yen, the Korean currency continued its plunge against the dollar for the second consecutive day on Thursday, trading at 1,316 won at the local close, a loss of 10.70 won from the previous day's close.

Brokers predict that companies under Chung Mong-koo, chairman of Hyundai Motor Co and Kia Motors, will do relatively well because of strong sales in cars. Hyundai Motor Co reported last month that its net profit for 2000 shot up 61.19 percent to 667 billion won from 414 billion won the previous year. The car manufacturing concern was also buoyed by strong showings by Kia.

Analysts also say that Hyundai Heavy Industries (HHI), whose largest shareholder is independent Representative Chung Mong-joon, should also do well due to the boom in ship demands. HHI has been steadily building up its image as the world's largest single shipyard. According to company figures, the shipbuilding giant had sold $3.8 billion in ships last year, with a backlog of 140 ships that that should bring in an additional $7.4 billion.

On the other hand, companies under Chung Mong-hun, the designated heir to Hyundai, are expected to experience continued hardships. Hyundai Construction and Engineering, the conglomerate's flagship company, barely staved off bankruptcy last year and cannot be said to be out of trouble yet. The Hyundai Group said on Thursday it will donate the 15.77 percent stake in Hyundai Engineering and Construction Co held by Chung Ju-yung to the builder.

Hyundai Securities Co, whose executives tendered their resignations en masse on Thursday, also acknowledged 90 billion won in losses as of the third quarter last year and that it expects to remain in the red in 2001. The investment firm, which launched a successful "Buy Korea" campaign only a few years ago, is now unable to lure foreign investors.

In addition, Hyundai Asan, the group's North Korean venture unit, has openly admitted that unless drastic measures are taken soon, it might have to cut back on South-North exchanges due to continued losses. Hyundai Electronics Industries is also experiencing a liquidity crunch that it has not been able to shake since it took on a huge debt to buy the chip building arm of LG.

The Hyundai Group on Thursday sent an official notice on death of Chung to North Korea. Hyundai said that because North Korea is an extremely important business partner, it was only proper to convey the obituary notice.

The conglomerate has been an active participant in expanding business ties with the North, having maintained the Mount Kumgang tour since November 1998 and moves to set up an industrial complex in Kaesong city, just north of the Demilitarized Zone. "The message to North Korea was sent through fax via Beijing," said a Hyundai official. The notice, addressed to the North's Asia-Pacific Peace Committee, expresses regret on having to inform the company's Northern partner on the death of Chung, the official said.

A dealer for Shinhan Securities Co, commenting on the future movement of shares within the group's companies, said that private investors, at least, have already made up their minds about which Hyundai companies will entice investments and those that will not.

"They are already forecasting that with Chung Ju-yung gone, owners of the more viable companies will no longer be pressured into providing assistance for projects that would hurt their own profits," he said. The dealer also said that with foreign investors also against the idea of "risky" assistance packages, companies like Hyundai Motor Co should do well.

He also said that with Chung Mong-koo and Chung Mong-joon having taken steps to solidify their management positions from hostile takeovers, investors' worries about unstable leaderships will not materialize in the near future.

Hyundai Motor broke away from the group last year and is expected to be listed as a separate business group by the Fair Trade Commission April 1. HHI is also expected to officially break away from Hyundai this year.

Another securities analyst said with the market already aware of many forces tugging on the group, Chung Ju-yung's death will greatly impact public perception of the group. He said it could lead to the disintegration of one of Korea's largest conglomerates into smaller units, with profitable firms prospering and non-viable ones suffering the consequences of the market.

Despite the current crisises in the Hyundai Group, Chung is one of the most respected figures in Korea for his pivotal role in Korea's economic miracle. His business life mirrors Korea's transformation from a poor land to one of the biggest economies in the world.

Born into a poor farming family in what is now North Korea in 1915, Chung began his business life by selling his father's cow to buy a bicycle to sell rice in Seoul, at the age of 16. He than started a car repair shop. It was even more successful than the rice business.

US soldiers in the country to supervise the establishment of a new government in Seoul frequented his shop, although business was interrupted by the Korean War. But during a flight to Pusan, Chung received his biggest break.

His younger brother, In-yung, had been hired as an interpreter for a US officer who was looking for a construction company to build temporary lodgings for American servicemen. Within a few months, his Hyundai Engineering and Construction Co began to monopolize American-commissioned projects, and was well on its way to becoming one of Korea's most prominent companies.

Flush with success at home, Chung turned his attention to overseas markets. In 1975, Hyundai won several landmark infrastructure projects in the Middle East, helping to recycle some of the Arab oil dollars back to Korea's depleted foreign exchange reserves.

When the late President Park Chung-hee launched an all-out campaign to build heavy industries, Hyundai was asked to start a modern shipbuilding business, in a country that made little more than small fishing boats.

In a similar fashion, Hyundai broke into global markets in cars and electronics. Hyundai Motor introduced Korea's first domestic passenger car in 1976, and the export boom that followed popularized its corporate name around the world. Then, in the 1980s, Hyundai jumped into semiconductors in an effort to break into the high-tech industry.

In 1992, Ching signed a blank check to form a new political party and made a bid for the presidency. But the prospects of Korea's most powerful businessman also taking the levers of political control unnerved voters, and he came in third behind Kim Young-sam and Kim Dae-jung.

(Asia Times Online/Asia Pulse)

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