Hyundai heir gets closer to top spot

Chairman's son joins board of South Korean auto company

SEOUL, South Korea - Hyundai Motor Co appointed Vice-Chairman Chung Eui-sun to the company's board, bringing the 39-year-old billionaire a step closer to succeeding his father, Chung Mong-koo, as head of South Korea's biggest carmaker.

Shareholders of the Seoul-based company approved the appointment at a meeting in the city on Friday, Hyundai said.

The younger Chung joins Hyundai's board as the company is boosting sales in markets including China and the United States. The carmaker needs to avoid quality problems like those faced by Toyota Motor Corp, which recalled more than 8 million vehicles worldwide after expanding too quickly, said Kang Sang-min, an analyst at Hanwha Securities Co in Seoul.

"Toyota expanded too much, too fast," Kang said. "Now Hyundai is also growing a lot."

Investors will want Chung Eui-sun "to implement a more systematic, sophisticated management structure and find a new 'Hyundai Way', a path that's different from that of Toyota", he added.

Hyundai fell 3.6 percent to 108,000 won in Seoul trading, while the key Kospi index gained 0.4 percent. The stock has declined 10 percent this year after more than tripling in 2009.

Chung Eui-sun was named vice-chairman of Hyundai in August after serving as president of smaller affiliate Kia Motors Corp. He owns 6,445 common Hyundai shares, 1.8 percent of Kia and 32 percent of logistics unit Glovis Co, which are together worth more than $1 billion, according to data compiled by Bloomberg.

His rise through Hyundai's ranks parallels improving fortunes for the carmaker. The global recession that began in 2008, coupled with a weak currency, helped Chairman Chung Mong-koo take customers from Toyota and General Motors Co and expand Hyundai and Kia's combined share of the global auto market to a record 7.7 percent.

Chairman Chung identified quality as a top priority for Hyundai and introduced 100,000-mile, 10-year warranties in the US in 1999. In June, J.D. Power & Associates gave Hyundai the highest ranking among non-luxury brands in its initial quality survey, ahead of Toyota and Honda Motor Co.

Hyundai raised US sales 8.3 percent last year amid a 21 percent industrywide slump as it gained in quality rankings, introduced new models and spent more on incentives and marketing.

Last month, Hyundai's US sales rose 11 percent to 34,004 vehicles, less than the 25 percent increase projected for the automaker by Edmunds.com. Sales outside South Korea climbed 27 percent to 202,014 on demand in China and India.

Since the end of 2009, Hyundai and Kia had the biggest jump in loyalty and consideration by car buyers surveyed by Kelley Blue Book, an Irvine, California-based auto pricing service.

Hyundai and Kia owners who were considering sticking with their existing brand when buying new vehicles increased by 10.5 percent and 17.1 percentage points to 56.5 percent and 56.1 percent, respectively, Kelley Blue Book said in February.

Hyundai needs to keep its focus on quality improvement, said Young Chang, South Korea research head at UBS Securities Ltd in Seoul.

"The auto industry always has cut-throat competition," Chang said. "After its recent successes, Hyundai should be careful about being complacent and lax in terms of quality control."

Chung Eui-sun may use his position on the board to burnish his management credentials, said Song Sang-hoon, an analyst at Kyobo Securities Co in Seoul.

Other scions of founding families have struggled to lead carmakers. Ford Motor Co Chairman Bill Ford, the great-grandson of Henry Ford, stepped down as CEO in 2006 amid losses at the Dearborn, Michigan-based company and hired former Boeing Co executive Alan Mulally as his replacement.

Akio Toyoda, grandson of Toyota's founder, became president of the Japanese company in June 2009 after it posted a record annual loss.

He now faces the task of restoring Toyota's reputation after apologizing to customers and a US Congressional panel on Feb 24 for recalls.

Bloomberg News

(China Daily 03/13/2010 page10)