Train maker and union agree to proceed on IPO

Hyundai Rotem, the heavy industries arm under Hyundai Motor Group, said yesterday its management and labor union agreed to push forward with the initial public offering (IPO) process despite ongoing wage negotiations.

The company, which specializes in train manufacturing, said yesterday it held an event at its Changwon plant during which representatives of management and the union jointly announced their intent to proceed with a plan to have the IPO ready by the end of the year.

Hyundai Rotem’s IPO process reportedly was delayed when the union asked the company to foot the bill for loans and interest that workers will use to purchase employee ownership stock. The demand was part of wage bargaining for this year.

Although wage negotiations are continuing, the two sides agreed yesterday that the company’s IPO should progress as originally planned.

The company said that the IPO will strengthen the financial health of Hyundai Rotem and provide resources for R&D and facility upgrades, which will eventually improve conditions for workers.

“We will have a board meeting and file documents with the Financial Supervisory Service for an IPO as soon as possible,” Hyundai Rotem said in a press release.

The company also recently revived its IPO task force team. If everything goes according to plan, experts said, the IPO process could be finalized in November.

Hyundai Rotem was tabbed as a company that could inject some energy into the stock market. Although the price per share has not been determined, industry insiders estimate the IPO size at 500 billion won ($460 million).

Hyundai Rotem reported 1.47 trillion won in sales and 93.49 billion won in operating profit for the first half of the year. Net profit was 64.79 billion won.

The company has been expanding its profile in Hyundai Motor Group after Chairman Chung Mong-koo ordered the conglomerate to participate in construction of the Trans-Eurasian Railway (TER), which would save time and money when exporting cars.

That is in line with President Park Geun-hye’s plan to connect the Trans-Korean Railway and TER. If the project is finalized, people and goods could travel from Busan to London by rail.

Hyundai Rotem said officials from Uralvagonzovod, Russia’s top heavy industries and train manufacturer, visited the company’s plant and R&D center on Tuesday to discuss mutual cooperation on the project.

“The company can take the lead in designing trains, supplying parts and managing system engineering, while the train could be co-manufactured by both Korea and Russia,” Hyundai Rotem said in a release. “If North Korea also agrees to connect the railways, the country would also be able to assemble and produce trains.”

Hyundai Rotem since 2008 has been cooperating with Russian Railways and the Moscow Metro to enter the Russian railway market. It is currently developing a high-speed locomotive for the Russian environment and plans to bid to supply 2,500 subway cars and 231 circular railway cars for use in Moscow.

BY JOO KYUNG-DON [kjoo@joongang.co.kr]