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[EDITORIALS]One More Reprieve for Hyundai

Published: 05 Jan. 2003, 14:29

The national economy is being dragged around by Hyundai Engineering & Construction. The company's creditors decided Thursday to provide 2.9 trillion won ($2.2 billion) in assistance through measures that include forgiving debt in return for equity stakes. The decision comes following assistance of 340 billion won in loans with down payments on newly constructed houses as collateral, $400 million in guarantees on the performance of overseas projects and $227 million in aid to the company for extensions on maturing corporate bonds. All of these measures were taken this year.

The current situation is obviously more ominous than last November when the government chose not to let Hyundai Construction go under, concerned about the domino effect that its demise would bring. The announcement yesterday again fails to meet the standard and due course on how a troubled company should be revived, not to mention its disregard for equitable treatment. But repercussions from the fall of the largest construction concern in the country would be such that any possible solution is welcome as long as it works. The main concern is it just may not, and the national economy will be taken hostage.

Based on the 200 billion won in operating profit last year, the government must be projecting that the company will be able to service its 2 trillion won in debts following the debt-equity swap. The assumption that things will go as planned is outrageous, especially because of the sheer number and scale of variables in the construction industry, which cannot be compared with those in manufacturing. The due diligence audit currently under way may uncover more problems at Hyundai.

If the government's intention is not to have the national economy taken hostage by Hyundai, it must not assume that a 3-trillion-won assistance can save the company. It must prepare for the worst-case scenario, and its review must begin with the firm realization that the swap is merely a means to help the firm recover, not a solution in and of itself. The best of the best in trouble-shooting must be appointed to lead Hyundai's restructuring and establish a workable strategy for its climb back from the brink. In the process, the company must do all it can to restore credibility both domestically and internationally.