Hyundai son defies father's wishes

Chung Mong Koo (MK), chairman of Hyundai Motors, is refusing to obey his father's wishes and resign from the helm of Korea's top automaker. Hyundai Group's restructuring committee today said founder Chung Ju Yung (JY) and his two sons - Chung Mong Hun (MH), who was recently appointed chairman of the group and MK - would relinquish management control of the conglomerate and its affiliates. This was countered minutes later by a Hyundai Motors statement saying there would be no management changes until the company's spin-off has been completed.

MK's move follows on from the appointment of his younger brother, MH, as Hyundai Group chairman in March. Since the appointment, widely viewed as a snub, MK has been very vocal in stating his ambition to make Hyundai Motors one of the world's leading automakers. His grandiose plans include a possible bid for Daewoo Motors, which is currently for sale, though few see how he can assemble the necessary firepower to match likely offers from General Motors and Ford.

The Hyundai Group management changes unveiled today were part of a package of measures designed to appease the government and creditors, which would like to see the group's debts reduced via the sale of assets and cross-shareholdings and its various businesses split up. Calls for a restructuring have intensified over the last week after two Hyundai units, Hyundai Engineering & Construction and Hyundai Merchant Marine, were forced to ask creditor banks for additional overdraft facilities in order to repay maturing commercial paper.

Hyundai Group's measures provide for the sales of real estate and shares to raise W3.7 trillion ($3.3 billion) to reduce the group's W52.6 trillion of debt.

"The announcement by the Hyundai Group today should be acceptable to the government," says Richard Pyo, analyst at Credit Suisse First Boston.

One concern is, however, the lack of any timeframe in the Hyundai announcement. Staving off a necessary restructuring was a contributing factor in the downfall of Daewoo Group, Korea's second biggest conglomerate. Also, there has not been any clear indication as yet that concrete plans exist to improve transparency, accounting standards and corporate governance in Hyundai Group companies.