Hyundai Group in the post-Chung era

The death of Hyundai group honorary chairman Chung Ju-Yung, a figure of unmatched stature in the Korean business world, marks the end of an era.

Despite the death of its founder, it is unlikely that Hyundai Group will change fundamentally. Chung already handed over all group affiliates to his sons and they will continue to run the companies.

Internally, however, the group is expected to undergo major changes. Since last May, when he announced his retirement from active management of the group in line with the insolvency of Hyundai Investment Trust and Securities, Chung refrained from intervening in the group`s management. But his presence was still intensely felt.

In the late 1990s, Chung handed over day-to-day control of the group to his two sons, Mong-Koo and Mong-Hun. He still had the last word on important decisions.

For this reason, there were limits to the amount of control his sons could exercise. It was difficult for them to emerge from their father`s shadow.

Division of property:

Most of Chung`s properties were already handed over to his sons, so there won`t be a family feud over the division of property. The value of Chung`s holdings is estimated at about 200 billion won, which includes real estate and cash.

Previously, Chung told Kim Jae-Soo, head of the group`s restructuring team, to use the funds raised by selling his Hyundai Motor stocks to purchase Hyundai Engineering and Construction (HEC) corporate bonds. He also said if the investment in bonds paid off when HEC recovered, the funds were to be used for the public interest. His will is yet to be disclosed, but it is likely that such intentions will be affirmed.

Hyundai Group`s future:

Hyundai Group was divided into three smaller groups: Hyundai Motor Group, Hyundai Group and Hyundai Heavy Industries. The new Hyundai Group, successor to the sprawling conglomerate Chung created and now controlled by chairman Chung Mong-Hun, is in financial trouble. The survival of HEC, the group`s parent company, is another urgent concern.

Many experts wonder if Hyundai will regain its vitality and reclaim its past glory. Analysts say that HEC`s survival isn`t assured because of the ongoing slump in the construction industry. Still, Hyundai has hope of a revival. There could be another construction boom in the Middle East, which is flush with cash at the moment thanks to high oil prices.

Hyundai executives believe that the firm could be reborn as a global construction company if it enjoys big business in the Middle East and sharply reduces its domestic business operations.

Hyundai Electronics Industries (HEI) is also in trouble. With falling semiconductor prices, the future of HEI is uncertain. In addition, the group`s North Korean projects remain unprofitable.

Hyundai Motor Group, led by chairman Chung Mong-Koo, has to overcome a number of obstacles. First of all, the company has to compete with major automakers around the world. Already, France`s Renault and Ford Motor of the United States advanced into the Korean market and they are posing a strong challenge to Hyundai. Some even say that they might eventually account for as much as 50 percent of the domestic market.

Lee Byong-Ki eye@donga.com