Korean Assembly to Probe Hyundai Motor'Unreported Affiliates

Kim Sung-jin a Staff Reporter writing in the Korea Times reported that

The National Assembly will look into the business deals between Hyundai Motor and its unreported subsidiaries next month.

The decision came out after the Fair Trade Commission (FTC) fined the largest automobile company in Korea for shady deals with its unreported subsidiaries.

A parliamentary committee would look into Hyundai Motor for another alleged case of attempting to hide its relationship with its construction subsidiary HLAND next month.

The Assembly has called Kim Dong-jin, Hyundai Motor¡¯s president, and HLAND CEO, Chang Chang-ki, to testify at the parliamentary hearing.

Both Hyundai Motor and the FTC are perplexed by the National Assembly¡¯s decision to take the issue with Hyundai Motor about the affiliate disguise matter that has already been scrutinized by the FTC earlier this year.

HLAND, the company under the spotlight, is a construction firm established in March 1999 that operates businesses ranging from construction and engineering to overseas real estate projects. The construction and engineering projects conducted by the construction startup were mostly for the Hyundai Motor group.

HLAND also undertook facility installation work for the Hyundai Motor group¡¯s new headquarter building in Yangjae-dong, southern Seoul.

HLAND is also under suspicions for being an unofficial subsidiary of Hyundai Motor as it was established by Chang Chang-ki, a former Hyundai group official, who is also CEO of Dongsuh Dynasty Corp., a company contracted to provide consignment and security guard services for Hyundai and Kia Motors.

Hyundai Motor and HLAND jointly invested in Dongsuh Dynasty Corp. Two former Hyundai Precision and Industry Co. and former Hyundai Mobis officials are currently serving as standing directors and are large shareholders of Dongsuh Dynasty Corp.

Chang has served as head of the sales team of the Swiss Grand Hotel, now the Grand Hilton Seoul, and head of the planning department of Hyundai Capital since 1999 when Chung Mong-koo took over the Hyundai Motor group chairman¡¯s post.

Nearly half of HLAND¡¯s posts are filled with officials transferred from Hyundai Development Company and Hyundai Engineering and Construction.

According to the HLAND audit report made public by the Financial Supervisory Service (FSS), the construction company has grown rapidly since its establishment. It chalked up 4.4 billion won in net profits on sales of 160.2 billion won last year, up from 71.3 billion won in sales in 2000.

The company was set up with a capital of 1.42 billion won, and HLAND CEO Chang owns 45.76 percent of the share, while two other shareholders hold the remaining 29.24 percent and 25 percent stakes respectively.

The FTC has said it is very difficult to verify whether HLAND is a disguised affiliate of Hyundai Motor or not. Thus if HLAND is proven to be a disguised subsidiary of Hyundai Motor, the FTC will face criticism over its ability to conduct investigations.

``We neither have evidence that HLAND is a hidden subsidiary of Hyundai Motor nor have we conducted any investigation into the related parties regarding the matter. We will have to wait and see how parliamentary inspection unfolds and decide upon follow-up measures,¡¯¡¯ said the FTC.

``It is difficult for us to comment on the National Assembly¡¯s decision to take the issue about HLAND. It is true that HLAND is founded and operated by former Hyundai group officials, but it is not another disguised affiliate of Hyundai Motor group,¡¯¡¯ said a Hyundai Motor official.

HLAND plans to expand its business scope to residential and office facilities and the leisure market in the near future.

The FTC fined Hyundai Motor 600 million won and issued a warning to chairman Chung Mong-koo last month for failing to register subsidiaries in which it had held managerial control, including Wia, Korea Precision, WISCO and Bontec EM.