Hyundai Looking at Life Without Chung

The Hyundai Kia Automotive Group’s fear of a leadership vacuum became reality with the arrest of Chairman Chung Mong-koo. It has decided that each affiliated firm will be run independently while Chung is away.

This reflects the realistic judgment that there are no senior executives to run the whole group with the responsibility and authority to coordinate the issues of the group and affiliated companies.

This caused some to carefully predict that after a while, Chung will “run the group from prison,” taking matters into his hands again.

Appointing an acting chairman is not a viable option-

On April 29, the day after Chairman Chung was arrested and put in prison, Hyundai Automotive Group held an emergency meeting in which senior executives of major affiliated companies participated.

The vice chairman of Hyundai Automotive Group, Kim Dong-jin, presided over the meeting at which about 20 executives (vice presidents and up) from major affiliated firms discussed ways to run the group while Chung is in prison.

After the meeting, the group announced, “We have reached a decision that all executives and employees of Hyundai Kia Automotive Group will do their best so that business will be as usual without a separate emergency organization or an acting chairman in place.”

Hyundai seems to have reached this conclusion based on the judgment that even if an acting chairman is appointed, he or she would not be able to perform the roles assumed by Chung properly, given that Chung made final decisions on virtually all important issues.

Setting up an emergency organization like the Doosan Group’s Emergency Management Committee and running collective management systems are not effective solutions either, because there are no executives who are powerful enough to coordinate pending issues and opinions of affiliated firms.

Vice chairman Kim Dong-jin, who is the leader of Hyundai’s vice chairmen, mainly took care of Hyundai Motors, rather than pending issues of the group, and he himself is being investigated by the prosecution, which makes it difficult for him to take over the role of acting chairman.

Other vice chairmen are also not able to assume the role of coordinating because there are clear limitations to their responsibilities. All this reveals that the presence of “one-man leadership” was too big in the Hyundai Automotive Group.

Is running the group from prison possible?-

Hyundai Automotive Group dismissed the observation that Chung Eui-sun, president of Kia Motors and the son of Chung Mong-koo, would wield influence, saying, “President Chung Eui-sun will remain devoted to running Kia Motors.”

Thus there are speculations coming from in and outside of the group that Chung will run the group from the prison by getting reports on important pending issues from each affiliated company and make decisions in prison.

An unconvicted prisoner is entitled to one general visit a day and its duration is limited to five to 10 minutes. Until he or she is convicted, special visits which last about 30 minutes are not allowed. President Chung Eui-sun made a general visit to Chung on April 29.

Theoretically, it will be possible to run the group from the prison after mid May when Chung is expected to be indicted.

However, limited access to information and the short duration of each visit are being pointed out as possible difficulties in running the group from prison. It is forecast that even if Chung runs the company from prison, he would be able to do no more than approve results from meetings of vice chairmen. What it means is that a temporary stop has been put on massive new investments by Hyundai Automotive Group.

Meanwhile, most executives of Hyundai Automotive Group went to their offices on April 29 and 30 over the weekend and were busy in order to minimize the possible repercussions of the chairman’s absence. Major department managers and above will work on May 1, the May Day holiday.

Sung-Won Joo Hyo-Lim Son swon@donga.com aryssong@donga.com