Reorganization Underway
Attention is focusing on Hyundai Motor Group’s reorganization plan. Hyundai Motor Co. and Kia developers are scheduled to be relocated to recently acquired autonomous driving startup 42dot, and Hyundai Mobis, a core subsidiary of the group, is planning to set up module and component production subsidiaries.
At present, the group’s module plants and component manufacturing arms in South Korea are run by 20 or so partner companies. The plan of Hyundai Mobis is to turn those into its fully owned subsidiaries, which will increase the number of its subsidiaries from three to five, by November this year and improve its employment efficiency before future car business expansion.
When it comes to the software part of the group, its mobility service HQ and artificial intelligence R&D HQ will be absorbed by 42dot so that redundancy can be avoided. According to experts, the group is expected to open a global software center in South Korea through this merger process and the center is likely to be in charge of the group’s software-defined vehicle business in the future.
Industry watchers say the reorganization is a preparation for the group’s governance overhaul. In the group, Kia, Hyundai Mobis and Hyundai Motor Co. have a cross-shareholding structure, chairman Chung Eui-sun’s shareholdings in the respective companies are as low as 1.74 percent, 0.32 percent and 2.62 percent, and he is in control of the group via Hyundai Glovis, where his shareholding is 23.29 percent. Of the top 10 business groups in South Korea, only Hyundai Motor Group currently has such a structure.
In fact, the group launched a reorganization project in March 2018. Its plan at that time was to merge the module and after-sales service arms of Hyundai Mobis with Hyundai Glovis and turn the remaining part of Hyundai Mobis into the group’s controlling company so that the governance can be simplified into the chairman governing Hyundai Mobis in control of Hyundai Motor Co. and Kia.
The reorganization project failed as Elliott Investment Management urged the group to simplify its governance with a holding company. In addition, proxy advisors, including Institutional Shareholder Services, claimed that the Mobis-Glovis merger ratio was disadvantageous for shareholders.
“A change in governance structure is an urgent matter for the chairman and he is likely to carry out Mobis-centered shareholding adjustment by inheriting the Mobis shares of honorary chairman Chung Mong-koo,” said Yuanta Securities Korea analyst Choi Nam-gon, adding, “Hyundai Mobis will control the group in the end by concentrating on more profitable and promising parts and turning less profitable parts into subsidiaries.”