Hyundai Must Reform or PerishIt's a lucky thing that the 'Hyundai Shock' is over, and that most stocks have almost regained their original value. But in order to completely dispel rumors about a Hyundai crisis, and for Hyundai related stocks to completely regain their value, many people involved in the market believe that Hyundai needs to speed up its planned reforms.
Hyundai Investment Trust's recent announcement of company reforms was not exactly what people had in mind. It wasn't concrete enough and the time till completion was simply too long. The trust company's plans were so bad that the government informed Hyundai that they couldn't lend Hyundai any funds until the plans were revised.
The 'Hyundai Shock' started with problems in Hyundai Investment Trust, but the fundamental problems arise from distrust of Hyundai Group's management practises and its apparent lack of effort when it comes to reforms. So for Hyundai to regain the trust they once had, intense reforms at the group level, as well as improvements in management and ruling systems, are needed. In short, all measures that can be taken, must be taken.
The recent contribution by the Chung family of private funds is the topic of frequent discussion these days. But this isn't a problem that people outside Hyundai Group can fix; it's a problem that has to be solved by those directly involved.
Hyundai Investment Trust certainly didn't have control over all its problems, including debt resulting from the takeover of Hannam Investment Trust but there are some problems that Hyundai cannot deny responsibility for, such as their unwise investment in Daewoo bonds. And if the Financial Supervisory Service and People's Solidarity for Participatory Democracy's investigation into the Hyundai Investment Trust's alleged loaning of outside investors' funds to Hyundai affiliates turn out to be true, the group will have some serious explaining to do.
Long term, low interest funds meant to quickly get rid of Hyundai's immediate problems are inevitable. But to dispel rumors about the government's preferential treatment of Hyundai, Hyundai needs to prove that they are really working to solve their problems.
Hyundai probably knows best how to re-establish their trustworthiness on the market. It cannot be denied, however, that the most important thing is that Hyundai make their management practises more timely and transparent. Trying to buy time is the worst possible thing they can do right now. The drop in Hyundai stock prices occurred when institute investors and foreigners began selling their Hyundai stocks, and there is still the possiblity that it might happen again. Time is not on Hyundai's side.
by Kang Hong-joon