Bumpy ride for Hyundai tycoon

Business Asia, Oct 25, 1999 by Cameron Cooper

For years chaebol leaders were feted as business royalty in Korea. Hyundai's Chung Mong Gyu has seen the flip side in recent years.

The life of Chung Mong Gyu would, on face value, appear rosy.

At the tender age of 37, the Oxford graduate heads Hyundai Industrial Development and Construction -- an important arm of South Korea's most famous conglomerate.

And as nephew of Hyundai founder Chung Ju Yung, he is a member of Korea's business royalty and a rich man in his own right.

However, the past couple of years have been tough for the boyish-looking Mong Gyu.

Instead of being feted, Korea's bloated family-run chaebol, or conglomerates, have been demonised for leading Korea into financial turmoil that forced the government to accept a US$58.35 billion bailout arranged by the International Monetary Fund in late 1997.

Burdened by debt and injudicious expansion, seven of the top 30 chaebol collapsed, while the big five -- Hyundai, Daewoo, Samsung, SK and LG -- have battled on. Real fears for the future of Daewoo remain.

Mong Gyu says his family name has not protected him from criticism.

"It's been tough. At this time, many people in Korea blame the economic turmoil on the chaebol structure. And I think the chaebol have to take some sort of responsibility," he said.

"(But) the country couldn't have recorded (its past) economic achievement unless there were the chaebol. From now on everybody will ask for more transparency in management, so I think all chaebol are ready to accept the comments from other people."

Restructuring the chaebol remains the biggest challenge for President Kim Dae Jung. Almost two years into his administration, there are still many who doubt he will triumph. Critics argue that the hydra-like chaebol are developing new expansionist strategies even as they shed old arms. The telecommunications and financial service industries appear likely targets for growth.

Mong Gyu claims Hyundai is serious about reforms.

"Hyundai is trying ... I think we can achieve what we have told the public and the government," he said. "Hyundai is going to be about reducing its debt this year. We have successfully increased our capital reserves, so I think nothing dramatic is coming.

"We have done very, very painful restructuring over the last year, so nothing is wrong so far.

Mong Gyu's problems in the past year have not been confined to public or government discontent. He came off second best after rumblings within the Hyundai empire earlier this year.

Mong Gyu and his father Chung Se Yung took over Hyundai Industrial Development, Korea's largest apartment unit builder, in exchange for giving up their shares in the group's flagship Hyundai Motor.

The deal was drawn up by the iron-fisted family patriarch Ju Yung, who installed his eldest living son, Mong Koo, as chairman of Hyundai Motor.

The move was effectively a demotion for Se Young and Mong Gyu, who had been chairman and vice-chairman, respectively, of the automotive giant.

The shifting of the chairs was widely reported as a family feud, although it perhaps had more to do with Ju Yung positioning Hyundai for the new millennium.

By 2003, the group will separate into five businesses based on cars, construction, electronics, financial services and heavy industry. Putting the well-credentialled Mong Koo in charge of the automotive business seemed a logical step.

At the time, Mong Gyu struggled to hide his disappointment.

"I will devote myself to apartment construction business from now on," he said repeated]y, giving the impression that he had not made peace with his new challenge.

Mong GYU had seemed set for a long reign at Hyundai Motor. Under his father's guidance, he climbed quickly up the corporate ladder to become chairman of Korea's main car-maker. He then faced a major setback, being demoted to vice-chairman as the result of a shakeup in 1998.

The demotion was painful, according to Hyundai insiders, as it came after he had finally settled agonising labour disputes with workers at Hyundai Motor.

This year's further demotion to Hyundai Industrial Development has been another bitter pill, but Mong GYU retains respect within business circles.

The share price of Hyundai Industrial Development rose substantially on the news that he would be running the company.

And Mong Gyu can now put on a brave face.

"I think I've been very lucky," he said, noting that construction of residential apartments is on the move again as Korea's economy rebounds.

Mong Gyu is also confident of Korea's future. Acknowledging the country's economy was a "disaster" last year, he expects GDP growth this year of about 9 per cent before the economy becomes a little "softer" next year.

A further fillip has emerged with the demise of Daewoo, which is a direct competitor with Hyundai in many fields.

Showing little sympathy for a rival, Mong Gyu describes Daewoo's plight as an "unexpected benefit".

The casual comment shows how hardnosed he has become over the past couple of years. With the chaebol still under fire -- and family rumblings perhaps lurking under the surface at Hyundai -- resilience is a trait Mong Gyu will probably need as Hyundai moves beyond 2000.