Sleazy Presidential Scandal Leads to Restructuring Rumors at Hyundai

Hyundai Motor Group has received added attention from investors this week over expectations that the family-run business could undergo a major reorganization into a public holding, with the same separate, multifaceted structure as Hyundai Heavy Industries.

News spread that Hyundai Motor could be preparing a restructuring campaign after it issued a disclosure statement last Friday that explained it would be charging Hyundai Steel and Hyundai Glovis Co. 13.9 billion won ($12.4 million) for the use of the Hyundai brand name. This is the first time the company has ever collected from either over the use of its corporate trademark.

It’s uncharacteristic of the automaker, but seeking royalties from companies operating under major holding entities is routine and may be the first step in Hyundai’s changing structure. Under the plan assumed by industry watchers like WardsAuto, Hyundai Mobis, which currently holds the largest stake in Hyundai Motor Group, would be converted into a holding entity — potentially shifting ownership.

However, the Chung family, who founded and maintain control the Korean company, could keep its ownership of the multi-business organization by holding the majority of shares in Hyundai Mobis. In fact, it would actually be easier for the Chung family to simply increase their stake in Hyundai Mobis while it’s still so much cheaper than Hyundai Motor’s. Of course, there is some minor speculation that the trio of Hyundai Motor Co., Hyundai Mobis, and Kia Motors could each be slit into holding and operating entities before being merged into one.

South Korea’s National Assembly is strongly encouraging various family-controlled conglomerates — including Hyundai — to reorganize into better regulated and more transparent organizations. Ideally, the country wants an emphasis on shareholder control and corporate responsibility. This added pressure stems from the recent impeachment of South Korea’s former president Park Geun-Hye, following news that some family-owned groups contributed massive donations to charities in exchange for special favors. Hyundai is among several companies that underwent investigation after the scandal’s emergence.

While the alleged misconduct hasn’t helped Hyundai’s image, speculation over the possible restructuring has driven up the stock prices of all three of its major affiliates this week.

[Image: Hyundai Motor Co.]