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[Editorial] Hyundai must not follow Daewoo path[Editorial]

[Editorial] Hyundai must not follow Daewoo path[Editorial]

Posted July. 27, 2000 12:38,   


How long will our economy be trapped by cash-strapped Hyundai Group? The Hyundai crisis, sparked by its family dispute over the group`s managerial control, has been so damaging as to plunge the whole financial market to chaos.

The main reason for the Hyundai crisis is attributed to its loss of credibility in the financial market. In particular, group owner Chung Ju-Young and his two sons have reneged on their promise to withdraw from group management, therefore failing to reform the old-fashioned management style and continuing to bog down the company amid their strife.

Hyundai officials protest the credit ratings agencies¡¯ downgrading of four Hyundai subsidiaries despite their improvements in financial structures. Yet it is Hyundai itself that is well aware of the reason for the downgrade.

Of course, it is irresponsible for some financial institutions to collect loans from the group in apparent influence by unwarranted rumors, and that has fueled the critical situation. And it is understandable for the financial sector to take precautions ahead of the financial restructuring. However, in view of the fact that the foreign banks are not shaken by the bad rumors, the domestic financial institutions are skeptical of their information-processing capability.

Despite the fact that Finance and Economy Minister Lee Hun-Jai has made clear that the government had no plans to put Hyundai Engineering and Construction in the corporate workout program or place it under court receivership, the financial market began calling in Hyundai debts. This is evidence of the level of government credibility. If the financial market believes it would survive by running against government policy, the government will find it difficult to enforce its policy measures and supervise the situation.

But for all this, Hyundai must not follow in the steps of the bankrupt Daewoo Group. How much damage was our economy obliged to sustain in the course of the Daewoo collapse? If Hyundai also goes bankrupt, while the aftermath of the Daewoo misfortune still lingers in various sectors in our society, our future is doomed. The Daewoo disaster, for which we paid an exorbitant price, should not be repeated.

From this perspective, the government`s self-imposed optimism is not desirable. Of course, the Hyundai situation is different from that of Daewoo, and the current financial market is not faced with the immediate crunch in terms of its structure, experts point out.

Nevertheless, the parties concerned -- Hyundai, financial institutions, and the government authorities -- should not be arrogant or nonchalant. Noting that there is no room for further tests, the three parties are required to make thorough preparations for any eventuality that might take place at any time.