Hyundai Corporation

founded: 1976

Contact Information:

headquarters: 140-2, kye-dong, chongro-kuseoul, 110-793 south korea phone: (822)746-1114 fax: (822)741-2341 email: [email protected] url: http://www.hyundaicorp.com

OVERVIEW

Launched in 1976 as the trading arm of South Korea's Hyundai Group, Hyundai Corporation is undergoing some major changes as the South Korean government moves to sell some of Hyundai's ailing units to foreign investors. The principal divisions of Hyundai Corporation, before the current divestiture campaign began, were its Ship and Plant Division, Machinery Division, Steel Division, Chemical and Business Development Division, and e-Business Division.

The Ship Department of Hyundai's Ship and Plant Division has exported more than 1,000 vessels jointly with Hyundai Heavy Industries Inc. (HHI) and other Korean shipbuilders since 1973. The department acts as an organizer, coordinator, financier, and broker for Hyundai's ship-related businesses, including conversions, new buildings, repairs, sales and purchases, and financing for vessels of all sizes. To discharge these responsibilities, the department works closely with HHI, Hyundai Mipo Dockyard Company Ltd., and other South Korean shipyards, including Sambo Heavy Industries Company Ltd. Hyundai's stellar global reputation within the international shipbuilding industry is due in no small part to the efforts of this department. During 2000, exports overseen by the Ship Department broke down as follows: Cargo Vessels, 65 percent; Tankers, 27.9 percent; and Others, 7.1 percent. Geographically, 47.6 percent of Hyundai's 2000 ship exports went to Europe; 10.9 percent to Latin America; 9.7 percent to Africa; 8.9 percent to Asia; 8.5 percent to the Middle East; and 14.4 percent to other regions. The Plant Department provides services related to the marketing and development of projects to major Hyundai affiliates and other South Korean industrial plant manufacturers. The Plant Department's exports in 2000 broke down as follows: Offshore Facilities, 46.8 percent; Power Plants, 24.1 percent; Oil and Gas Plants, 17.5 percent; and Others, 11.6 percent. Asia took 23.5 percent of the 2000 plant exports, with 20.1 percent going to the Middle East; 19.6 percent to West Africa; 17.2 percent to Europe; 13.7 percent to North America; and 5.9 percent to other regions.

Hyundai's Machinery Division supplies a wide variety of equipment, including industrial machinery, construction equipment, and electrical equipment, for use in major industrial sectors and markets. It is also responsible for the exportation of automobiles and automotive products made by Hyundai affiliates and other small and medium-sized South Korean manufacturers. The division also supplies general merchandise, new hides, and lamb pelts. In 2000 automobiles made up 91.4 percent of the Machinery Division's exports, followed by industrial machinery at 5.4 percent; electrical equipment at 1.5 percent; general merchandise at 1.1 percent; and other at 0.6 percent. North America took 46.1 percent of the division's exports, with 25.4 percent going to Europe; 8.3 percent to the Middle East; 7.4 percent to Asia; 7.1 percent to Latin America; and 5.7 percent to other regions. The corporation's Steel Division oversees the export of a wide variety of finished steel products made by Hyundai affiliates and other South Korean manufacturers. The Steel Division is also responsible for importing raw materials for the South Korean steel industry and finished steel products from outside the country. In 2000 steel products made up 76.3 percent of the division's exports, followed by metal products at 14.3 percent and others at 9.4 percent. The geographic breakdown of the Steel Division's exports is as follows: Asia, 68 percent; North America, 17.9 percent; Europe, 7.4 percent; Latin America, 3 percent; Middle East, 2.5 percent; and Others, 1.2 percent.

The Chemical Department of Hyundai's Chemical and Business Development Division handles trade in industrial chemicals, synthetic rubber, petrochemicals and petroleum, and plastic resins. In 2000, petrochemicals and petroleum made up 76.9 percent; plastic resins, 18.3 percent; industrial chemicals, 2.5 percent; and others, 2.3 percent. Asia took 86.6 percent of these chemical exports, followed by Europe at 3.8 percent; North American at 3.4 percent; Africa at 2.6 percent; and other regions, 3.6 percent. Other departments within this division are responsible for the development of new businesses in the following sectors: Natural Resource, Sports and Culture, and Wireless Internet and Mobile Commerce. Hyundai's e-Business Division, which was launched on January 1, 2000, is responsible for developing an Internet business strategy for Hyundai. Its ultimate goal is to develop a plan that will transform Hyundai into a "Global Digital Network Enterprise.

Hyundai's Korean name means "present time," and the watchword for the present time in South Korea is change. Battered by a prolonged and profound economic downturn, South Korea's huge conglomerates known as "chaelbol" are under orders from the Seoul government to begin trimming down by selling off unprofitable operations. In the fall of 2001, Hyundai Heavy Industries (HHI) took steps to sever its relationship with Hyundai Corporation and Hyundai Securities.

COMPANY FINANCES

As a foreign-based public corporation traded exclusively on stock exchanges outside the United States, Hyyndai Corporation is not subject to the regulations of the U.S. Securities Exchange Commission in regard to deadlines for its financial reports. The company reported a net loss of $60.7 million on revenue of almost $32.4 billion in 2000. This compared with a profit of $20 million on sales of nearly $32.9 billion the previous year. Hyundai's profit in 1998 was $7 million on sales of about $28.4 billion.

HISTORY

The history of Hyundai Coporation is linked inextricably with that of Hyundai Group, for which it serves as trading arm. The Hyundai Business Group, established in 1947, grew rapidly in the years following World War II and the Korean War, its growth fosted by the ambitious reconstruction programs of the South Korean government. It was during this period that the South Korean economy came to be dominated by a relatively small number of huge conglomerates, knowns as "chaebols." The chaebols worked closely with the Seoul government to rebuild South Korea's shattered economy after the Korean War. In the process these conglomerates became a vital element in the nation's economic strategy and its efforts to beef up its industrial base.

The Hyundai Group grew up around the core of Hyundai Engineering & Construction Company, founded in 1947 by Chung Ju Yung. In 1958 the group expanded when it created Keumkang Company to produce construction materials. In 1964 the group added Danyang Cement plant, and in 1967 it set up the Hyundai Motor Company. By 1969, the group had set up a U.S. subsidiary, Hyundai America Inc., headquartered in Los Angeles. In the late 1960s and early 1970s Hyundai Group moved into still other sectors, including chemicals, petroleum, steel, and shipbuilding. Hyundai Corporation was formed in 1976 to serve as the trading arm for Hyundai Group. But the group was hardly through with its expansion. That same year, the conglomerate formed Hyundai Merchant Marine Company, Koryeo Industrial Development Company, and Hyundai Housing and Industrial Development Company. A year later, the group created Hyundai Precision and Industry Company to manufacture automotive and locomotive components, as well as containers.

Four years after the creation of Hyundai Corporation, the annual exports of Hyundai Group reached the $1 billion mark. A year later Hyundai's shipbuilding operation landed its biggest export order ever—a $400 million order for containerships from United Arab Shipping Company. The group began exporting steel in 1985. Hyundai Corporation in 1990 opened an office in Moscow, the first for a Korean company.

FAST FACTS: About Hyundai Corporation

Ownership: Hyundai is a publicly owned company traded on the South Korean Stock Exchange.

Officers: Chun-jae Kwan, Pres. and CEO; Doo-seon Lee, SVP and CFO

Employees: 867

Principal Subsidiary Companies: Hyundai Corporation operates a number of subsidiaries, some of which are major operating divisions of the South Korean trading company, while others oversee the company's business in foreign countries. Hyundai's leading subsidiaries include Hyundai Engineering & Construction Ltd., Hyundai Heavy Industries, Hyundai Motor Company, Hyundai Merchant Marine Company Ltd., Korea Industries Development Company Ltd., Hynix Semiconductor Inc., Hyundai Petrochemical Company Ltd., Hyundai Corporation U.S.A., Hyundai Corporation Europe GmbH, Hyundai Corporation UK Ltd., Hyundai Japan Company Ltd., and Hyundai Australia Pty. Ltd.

Chief Competitors: Hyundai's principal competitors include rival South Korean trading companies, including LG International, Samsung, and SK Group.

By 1995 less than 20 years after the founding of Hyundai Corporation, the group's annual exports had reached a level of $10 billion. Hyundai's exports continued to climb for the remainder of the decade, reaching an annual level of $15.6 billion in 1997 and $22.2 billion in 1999. The group's exports totaled $27.8 billion in 2000, the last year for which figures were available.

STRATEGY

As Hyundai spins off some of the less profitable of its operations, the company is diligently exploring other sectors for possible acquisitions that show more promise. Hyundai Corporation's motto is "Creativity and Speed," and the company is counting on the innovative genius of its employees and its reputation for speedy-but carefully considered decisions-to steer it into new profitable businesses before the competition.

In early 2001, Hyundai Corporation signed a contract with the South Korean city of Nam-hae to become partners in the profitable business of operating Namhae's training camp for finalists playing in the 2002 World Cup. Under the terms of the agreement, Hyundai Corporation was given exclusive management rights for the Nam-hae sports park, the completion of which is scheduled in 2004. This is a new business for Hyundai, and it shows great promise. Not only will the company reap profits for attracting soccer players to the training camp in 2002, but it stands to benefit for a number of years thereafter under the terms of its management agreement with Nam-hae.

Another important element in Hyundai's short-term strategy involves the integration of its traditional marketing channels with its Internet-based sales operations to take full advantage of the growing potential offered by e-commerce. The company is also gearing up to maximize the benefits it will reap from the move toward the wireless Internet market, as more and more people worldwide seeks wireless access to the World Wide Web.

INFLUENCES

The South Korean government, recognizing that many of the country's general trading companies (GTCs), of which Hyundai Corporation is the largest, were being dragged down by unprofitable operations, ordered that the country's massive conglomerates, or "chaebols," begin selling off their ailing operating units. This has forced Hyundai to look to new sectors to increase its revenue. Hyundai Corporation, turning away from its heavy reliance on heavy industry, such as steel and chemicals, plans to focus much of its resources in coming years on such promising new businesses as e-commerce, e-projects, sports marketing, venture investment, and MRO (maintenance, repair, operations).

The Seoul government's economic reform campaign hit something of a snag in January 2002 when U.S. insurance giant American International Group (AIG) withdrew from a $838 million deal to take over South Korea's troubled financial companies. The government expressed confidence that it ultimately would find a buyer for Hyundai's ailing financial units, Hyundai Investment Trust and Securities, Hyundai Investment Trust and Management, and Hyundai Securities. For its part, the government said it had decided to terminate negotiations with AIG after the American company insisted on "unacceptable" terms. Reportedly AIG had demanded that the South Korean government guarantee compensation for any additional debt discovered after it completed its acquisition of the Hyundai units.

Despite the confident tone of government officials, outside observers expressed concerns that the aborted deal with AIG might erode foreign investor confidence and cause problems for the government's efforts to sell other ailing companies, including Hynix Semiconductor and Daewoo Motor. If the government is successful in selling off all of Hyundai's troubled operations, the once-giant conglomerate will be transformed into a mid-size business group centered on Hyundai Merchant Marine, Hyundai Elevator, Hyundai Asan, and some small subsidiaries.

CHRONOLOGY: Key Dates for Hyundai Corporation

1947:

Hyundai Business Group is formed

1976:

Hyundai Corporation is established as trading arm of Hyundai Group

1980:

Annual exports handled by Hyundai Corp. reach $1 billion

1985:

Export of steel products begins

2000:

Annual exports reach $27.8 billion

CURRENT TRENDS

In terms of the short-term future for Hyundai, undoubtedly the most important trend in South Korea and worldwide has been the rapid growth of information technology, thanks in large part to the Internet. It is in this arena that Hyundai will concentrate much of its energies in the foreseeable future. The company is in the process of more closely integrating its existing marketing operations and those on its Web site. In an FAQ section on the company's Web site, Hyundai Corporation has this to say about how it plans to grow in the new millennium: "Hyundai Corp. will focus its resources on several highly profitable businesses, such as e-trading, e-project, MRO (Maintenance, Repairs, Operations), sports marketing, and venture investment by using its enhanced global networks and knowledge-based management."

PRODUCTS

As the trading arm of the Hyundai Group, Hyundai Corporation produces no products as such but rather oversees the export of goods produced by Hyundai manufacturing units and other smaller South Korean manufacturers as well as the imports of raw materials and other products needed by the group's manufacturing units. The principal products exported by Hyundai Corporation include merchant ships, industrial plants, automobiles, industrial machinery, electrical equipment, steel products, petrochemicals and petroleum, plastic resins, and industrial chemicals.

HYUNDAI CORP. EXPANDS INTERMEDIARY TRADE

Although it lags well behind some of South Korea's other general trading companies (GTCs), Hyundai Corporation is beginning to increase its intermediary trading among third nations. The rapidly changing world trade climate, as well as Seoul's pressure on the GTCs to sell off their poorly performing subsidiaries, have prompted the South Korean trading companies to explore new forms of trade. Hyundai Corporation's involvement in third-nation trading, while still extremely small, is beginning to increase fairly dramatically. While it amounted to only 0.4 percent of total trade in 1998, such trade had increased to 1 percent of Hyundai's trade in 2000. This was roughly equivalent to $300 million in trade. A Hyundai spokesman said: "We are planning to compensate for the possible loss in income following the spinning off of the subsidiaries by strengthening the third-nation trading."

GLOBAL PRESENCE

Hyundai Corporation exports to and imports from around the world. The company maintains a global network of 64 overseas branches, including eight subsidiaries responsible for regional operations. Hyundai operates branch offices on every continent except Antarctica.

SOURCES OF INFORMATION

Bibliography

hyundai corporation annual report 2000. seoul, south korea: hyundai corporation, 2001.

"hyundai corp.—history." gale business resources, 2002 available at http://galenet.galegroup.com/servlet/gbr.

"hyundai corporation." hoover's online, 2002. available at http://www.hoovers.com.

hyundai corporation home page, 2002. available at http://www.hyundaicorp.com.

lee, jong-heon. "s. korea reform drive facing new challenge." united press international, 18 january 2002.

"trade firms expand intermediary trade." korea times, 28 october 2000.

For an annual report:

on the internet at: http://www.hyundaicorp.com/eng/investor/annualreport.htm

For additional industry research:

investigate companies by their standard industrial classification codes, also known as sics. hyundai corporation's primary sics are:

3679 electronic components, nec

3711 motor vehicles and car bodies

5010 motor vehicles-parts and supplies

5013 motor vehicle supplies and new parts

also investigate companies by their north american industry classification system codes, also known as naics codes. hyundai corporation's primary naics codes are:

327211 flat glass manufacturing

333924 industrial truck, tractor, trailer and stacker machinery manufacturing

336111 automobile manufacturing

336211 motor vehicle body manufacturing

336399 all other motor vehicle parts manufacturing

522298 all other non-depository credit intermediation