It Is Time for Hyundai to ActLocal stock markets are fluctuating wildly due to rumors surrounding the financial health of Hyundai.
The rumors - that Hyundai is suffering from a serious liquidity crisis on a group-wide basis - caused the stock prices of Hyundai affiliates to nosedive yesterday. Finance and Economy Minister Lee Hun-jai rushed to Hyundai's defense saying, "At present, Hyundai is not experiencing any liquidity problems." However, his comments were unable to quell fears among domestic and international investors who unloaded their Hyundai stocks.
In order to avoid a possible situation where shockwaves from the failure of the group could seriously damage the economy as a whole, Hyundai should devise a set of self-rescue measures. The problem originated because of possible cash-flow problems involving Hyundai Investment Trust. However, the reason that the problem is worsening is because Hyundai has lost the trust of financial markets. The disgracful conflict surrounding the group's planned succession, along with the crippled operation of the Buy-Korea Fund, as well as allegations of stock price manipulation have caused both domestic and international investors to lose faith in the Hyundai Group.
The problem however is not completely Hyundai's fault. Hyundai officials correctly assert that the government should provide liquidity to Hyundai Investent Trust because the government forced Hyundai to buy the ailing Hannam Investment Trust, hamstringing Hyundai with bad debts. Hyundai has made all-out efforts to improve its management and has realized substantial profits through its healthy motor and electronics affiliates.
Such efforts, however, are not sufficient to regain the trust of Hyundai investors. Hyundai has to strive to change its old-fashioned managerial structure. Prior to demanding that the government support Hyundai Investment Trust, Hyundai should make all-out efforts to put into place its own self-rescue measures. Hyundai should also hasten its efforts to restructure its affiliates and dispose of assets. Such measures should not be be undertaken tentatively merely to escape the present crisis.
The government is also to blame, as its inconsistent policies have contributed to the situation. Financial markets cannot regain stability until the problem of Hyundai Investment Trust is resolved. Any support given to Hyundai should be minimized since the taxpayers are shouldering the burden for mistakes that Hyundai and the government have made.
In conclusion, the pace of corporate reform must continue afoot. As seen in the case of Hyundai Investment Trust, the situation will only become aggravated while the full scale of the problem is unknown. When problems occur, companies should openly reveal their situation and should ask for aid from the government based on the principal of full transparency.
by Jung Kyung-min