Hyundai Heavy Industries suffering from the worst order drought has completed a process of dividing the company swiftly and decisively. This means that the company changed their business structure where its shipbuilding and non-shipbuilding business have hamstringed each other over the past decades in just three months. This means also that the management of Hyundai Heavy Industries in a slump of the shipbuilding industry are feeling a great sense of crisis. Hyundai Heavy Industries founded in 1973, expressed the urgency of its situations, saying that the split-up was "the second foundation of the company."
Hyundai Heavy Industries approved a split-up plan to break down the company into four corporations by holding a special shareholders' meeting at Hanmaeum Hall near its headquarters in Dongguan in Ulsan on February 27. The approval came three months after the company decided to divide itself into six independent corporations via split-up methods at the board meeting last November.
Hyundai Heavy Industries, with the approval at the shareholders' meeting on the same day, will be divided into six firms including Hyundai Global Service, Hyundai Green Energy, Hyundai Electric (electric and electronics), Hyundai Construction Machinery (construction equipment) and Hyundai Robotics (robots and investment) on April 1.
Hyundai Heavy Industries, which jettisoned the non-shipbuilding business by means of the split-up, will be able to flexibly respond to the shipbuilding industry crisis based on slim organization. First of all, 4,000 to 5,000 employees were transferred to the split-up companies. Borrowings of more than 3 trillion won (US$2.5 billion) were also allocated to the subsidiaries, reducing the shipbuilding division’s financial burdens. The debt-to-equity ratio of Hyundai Heavy Industries, which stood at 106% as of the end of last year, will drop to about 95%. "As the financial structure has improved, Hyundai Heavy Industries will be able to secure a more advantageous position than other shipbuilders in completion to land new orders," a Hyundai Heavy Industries official said.
The non-shipbuilding business operations break away from Hyundai Heavy Industries, which is the world's No. 1 shipyard, and will enter and compete in the global market on their own. There is a concern that they do not have a strong supporter any longer, but general evaluation says that they have taken opportunities to become global players.
Apart from these business aspects, Hyundai Heavy Industries’ governance structure has also transformed into a holding company system, simplifying the governance structure and completed the task for the succession of the management right.
Hyundai Robotics will become a holding company by taking over 13% of Hyundai Heavy Industries' treasury stocks and a 91% stake of Hyundai Oilbank during the split-up process. The affiliated will place just under the chairman of the Asan Foundation, Chung Mong-joon, the largest shareholder of Hyundai Heavy Industries. Analyzers say that the company’s governance structure was simplified and preliminary work for senior managing director Chung Ki-sun's succession to the group’s presidency was virtually completed through the split-up.
"The split decision is aimed at eliminating inefficiency that arises from the fact that the shipbuilding and non-shipbuilding business are tied together in one body." emphasized an official at Hyundai Heavy Industries.