Hyundai Efforts to Free Imprisoned Chairman Could Backfire

What appears to be a concerted effort by Hyundai Motor Group to free Chairman Chung Mong-koo from prison through overt business strategies and a public fear campaign is not achieving the desired effect outside Korea.

While the company may persuade the Korean people the sky is falling, its efforts to free this prized captain of industry is undermining confidence in the automotive organization in other regions of the world, where political face as well as capital is at stake.

Chung’s attorneys are said to be planning to petition the court for his release on bail this week. Whether or not they are successful misses the point.

Not content to wait for the judicial process, Hyundai and Kia spokesmen have made a series of public statements in recent weeks suggesting several proposed vehicle assembly plants may be put on hold because Chung is incarcerated and not able to make business decisions.

Chung was indicted May 16 on charges of embezzling 100 billion won ($109.7 million) in company funds that prosecutors say he used to create a slush fund for bribing government officials.

He also is charged with breach of trust for allegedly incurring about 300 billion won ($320 million) in damages to the conglomerate. Prosecutors also are investigating Chung’s son Kia Motor President Chung Eui-sun’s role in the bribery scandal.

Specifically, Hyundai is transparent in its threat to delay Kia’s proposed West Point, GA, vehicle assembly plant, as well as an upcoming $1.28 billion assembly plant in Czech Republic, as leverage in order to convince the judge in the case to release the senior Chung from detention.

A Kia spokesman in Seoul says any potential delay of the Georgia plant would be due to the fact only Chung Mong-koo can handle the details of such business matters.

“On the other hand, if Chairman Chung can come back to his office in one or two weeks, all of these decisions can be made, and the start of construction will not be affected,” he says.

Kia America and Georgia state officials say they have not been notified of any pending delay, while Czech officials, facing political heat in an upcoming election, have been adamant in denying their vehicle plant is on hold.

Meanwhile, pressure is mounting on the South Korean government to ease off the bribery investigation in the longer-term interest of maintaining national stability, particularly the positive impact of the Hyundai Motor Group on the domestic economy.

Last week, some 1,400 Hyundai parts suppliers called for Chung’s release from prosecutors’ custody. Since then, two other Korean auto industry groups reportedly have joined in a campaign to collect 1 million signatures seeking court leniency for Chung.

Chung Mong-koo is known for running his automotive companies with an iron fist, and it is difficult to believe such efforts are taking place without his consent. If so, he runs the risk of turning a brilliant business career into a tragedy worthy of King Lear.

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