Hyundai Motor Group is telling its business units to increase their dealings with other companies to head-off criticism that inter-subsidiary dealings are boosting the wealth of chairman Chung Mong-koo’s children.
Units are being told to develop business with non-affiliated firms and move into overseas markets. Innocean Worldwide, the group’s advertising arm, has already been moving aggressively outside South Korea.
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The company currently operates 20 offices in 16 countries. Chairman Chung’s eldest daughter Sung-yi holds a 40% stake in the company.
Chung’s only son, Eui-sun, holds a 32% stake in Hyundai’s logistics unit Glovis which handles Hyundai and Kia brand vehicle transportation. It is eager to diversify its revenue source.
A Glovis spokesman said: “Using our global network of 33 offices, we will emerge as an internationally competitive logistics provider. In particular, we would like to find clients among foreign automakers.”
The moves by Hyundai follow South Korean president Park Geun-hye’s pledge to penalise inter-subsidiary dealings which have been troubling Korea’s family-controlled conglomerates.
She has vowed to curb business transactions among chaebol affiliates in the name of “economic democratisation,” which her advisors say seeks to correct unfair business practices.
Policymakers and civic groups argue that generating the bulk of revenues from exclusive dealings with affiliated companies is tantamount to unfair business practices. Such transactions, they say, deprive unrelated firms, most of which are small- and medium-sized enterprises, of potential business opportunities.
The conglomerates argue, however, that such transactions are necessary to lower operational expenses, boost competitiveness and protect corporate secrets.
