Troubled Seoul: Probe Could Crimp Hyundai and Kia Expansion Plans

Date posted: 04-25-2006

SEOUL — An investigation into an alleged slush fund in Korea could curtail ambitious expansion plans by the country's top automaker, Hyundai Motor, and its Kia subsidiary.

Government prosecutors were scheduled on Monday to interview Hyundai Chairman Chung Mong-Koo in connection with the investigation. Prosecutors last week interviewed Chung's son, Chung Eui-sun, president of Kia Motors.

As part of Chung Mong-Koo's vision for Hyundai to become one of the world's top five automakers by 2010, the company is in the midst of an aggressive global expansion, with major new plant construction projects underway or announced in China, Eastern Europe and North America. Last year, Hyundai opened its first U.S. assembly plant near Montgomery, Alabama, and Kia late in the year announced plans to build its first U.S. plant in West Point, Georgia.

The Chung family, which controls Hyundai and Kia, last week agreed to donate $1.1 billion in stock in a Hyundai subsidiary to charity.

A report by Bloomberg news service quoted Hyundai spokesman Oles Gadacz, who described the investigation as "a distraction" and said the probe "is beginning to take its toll."

On the Korean stock exchange, Hyundai's shares have fallen more than 9 percent and Kia's shares have dropped 22 percent.

What this means to you: The Hyundai steamroller appears to have slowed, at least temporarily.

Link: http://www.edmunds.com/insideline/do/News/articleId=110165

Uh-oh.

Edit: That $1.1 billion could have gone to better interior design!

Edited April 26, 200619 yr by sciguy_0504