Hyundai Motor senior vice chairman Chung Eui-sun flew to the United States to address Washington’s move to impose tariffs on imported cars. He became the company’s senior vice chairman two days ago, and chose the U.S. as the destination of his first business trip after the promotion.
He could not accompany President Moon Jae-in to Pyongyang for the inter-Korean summit. This implies how dire the company’s situation is. Chung is likely to have meetings with Commerce Secretary Wilbur Ross and many others in the U.S. government and Congress to discuss the tariff issue.
The United States is one of the largest markets for Hyundai. The U.S. government is planning to impose a tariff of up to 25% on imported cars based on Section 232 of the Trade Expansion Act of 1962. Then, some of the Hyundai Motor Group’s manufacturing facilities in South Korea may have to shut down.
Last year, Kia Motors’ manufacturing plant in Gwangju City produced 492,233 vehicles, of which 37.37% were exported to the U.S. The shipments included 109,146 Souls and Soul EVs and 73,717 Sportages.
The Souls sold in the U.S. are from the Gwangju plant without exception. Since its debut in 2009, this model has been the most popular entry-level CUV in the U.S. market. However, its price is likely to go up by US$5,000 or so after the tariff.
The challenges Chung is facing include pressure from Elliott Management as well. The Hyundai Motor Group was planning to hold an extraordinary shareholders meeting on May 29 with regard to a corporate governance reform plan. However, the meeting had to be indefinitely postponed due to opposition from shareholders after the activist hedge fund raised an objection.
After the interference, Elliott increased its shareholding in the group. At present, it has 3% of Hyundai Motor Company, 2.1% of Kia Motors and 2.6% of Hyundai Mobis. The hedge fund recently presented its own governance reform proposal. Hyundai is going to announce its plan late this month.