Restructuring
Hyundai Motor Group’s affiliate Hyundai Steel will merge with the cold rolled plate business sector of Hyundai Hysco, another affiliate of the Korean giant motor company. Currently, Hyundai Steel supplies steel sheets to Hyundai Hysco, which processes them into steel sheets used for making cars.
Hyundai Steel and Hyundai Hysco each held a board meeting on October 17, and agreed on the former’s taking over the latter’s unit of production and sales of cold rolled plates. The ratio of merge is 0.3889584 Hyundai Hysco per 1 Hyundai Steel. The merger will take place on December 31.
The merger is increasing public interest in Hyundai Motor Group’s future plans, as recently Samsung Group has restructured its business by transferring Cheil Industry’s fashion business to Everland.
Through this merger, Hyundai Steel can unify the steel business from steel molds to cold rolled plates, drastically increasing its competitiveness. Also, by securing stable suppliers such as Hyundai and Kia Motors, the company is expected gain profitability.
Through the cold rolled plate business merger, Hyundai Steel’s sales will jump immediately to 20 trillion won (US$18.8 billion). Last year, Hyundai Steel’s annual sales reached 14 trillion won (US$13.2 billion). Hyundai Hysco has been supplying about 77% of the plates used for complete vehicles of Hyundai and Kia Motors through its cold rolled plates business.
In addition, the unification of the process, which was divided between Hyundai Steel with heat rolled plates and Hyundai Hysco with cold rolled plates, will be able to eliminate any inefficiency in management, production, and sales.
Also, from a financial point of view, a stable source of profit is being secured to share the burden of repayment expenses. Hyundai Steel has about 11 trillion won (US$10.3 billion) in debt and has to pay some 300 billion won (US$282.9 million) in interest per year.
Last month, Hyundai Steel started to operate its third blast furnace with an annual production capacity of 4 million tons of crude steel, greatly increasing its output capacity.
Hyundai Steel’s integrated steel mill, now equipped with three blast furnaces, is able to produce an annual total of 12 million tons of crude steel. When including its electric furnaces, which can also produce 12 million tons of crude steel, Korea’s second largest steel manufacturer would be able to churn out 24 million tons of crude steel a year.
Meanwhile, Hyundai Hysco plans to increase its share in the global market by concentrating on the car weight reduction business through steel pipe production such as hot stamping, which is the core part of future automobile competition. It will also focus on the international steel service center business for producing and selling steel materials to the international production facilities of Hyundai and Kia Motors.