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Hyundai Motor Group is the umbrella for two fast-expanding Korean car brands, Hyundai and Kia. Emulating the success of Japanese rival Toyota, Korea's Hyundai secured a position as one of the world's top five manufacturers in 2009 and overtook Ford to become the global #4 in 2010. It is the most successful offshoot from the former Hyundai conglomerate, which split itself up into five separate businesses in 2003. Each business has enjoyed very different degrees of success since then. The car operations have reported dramatic and impressive growth since they were spun off, but the remaining parts of the group continue to wrestle with substantial debts and declining performance. Hyundai and Kia operate independently of one another but are both controlled and run by the Chung family.
Click here for a listing of Hyundai Agency Account Assignments from Adbrands.net. Hyundai declared advertising & sales promotion expenses of KWon 2,233bn ($1.92bn) in 2016. Kia declared declared advertising & sales promotion expenses of KWon 2,274bn ($1.96bn) in 2016.
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Watch out for Hyundai! Hyundai Motor Group, which also owns Kia Motors, is already far and away Korea's biggest auto manufacturer, and secured a position as one of the world's top five in 2009. The following year, it overtook Ford to seize the #4 spot, and has continue to advance upon the top three manufacturers, although for now it still remains well behind them by sales. However, the rapid growth delivered during the 2000s has slowed recently. The group missed sales targets in 2016, with combined vehicle deliveries of 8.18m units, and the figure for 2017 looks set to be some way below that, though not enough to cede 4th place to the next biggest manufacturer GM. Performance, especially in South Korea, has been dented by a succession of strikes by the country's notoriously outspoken labour unions. Hyundai workers have called strikes for five consecutive years from 2011 to 2016. The group has also been slower than rivals to shift its focus from its traditional mainstay in sedan cars to the SUVs which buyers now demand in most important markets.
Although they share a similar corporate strategy and ownership, Hyundai and Kia operate as separate companies, and for the most part sell through separate sales networks. Between them they operate a network of 35 manufacturing plants in 10 countries. To avoid conflict, the group clarified the positioning of its two brands in 2005, pushing both further upscale. Hyundai is cast as a "refined and confident" marque, and has gained considerable ground through a meticulous commitment to high quality, backed up with a 10-year warranty on new vehicles. That offer, first introduced in 1999, played a key role in changing attitudes to Hyundai models. Its latest positioning promises "New Thinking. New Possibilities": and "cars as living works of art that convey the dynamism of nature". In pricing, the brand thinks of itself as "modern premium", somewhere mass-market brands such as Ford or Chevrolet and the low end luxury models produced by BMW and Audi. Hyundai is widely respected for the huge improvements in its quality control, with the result that it regularly ranks first among non-luxury cars in most reliability surveys. It's an extraordinary turnaround for a car brand that even as recently as the 1990s still had a reputation as a low-end manufacturer. In 2013 Hyundai entered Interbrand's ranking of the top global brands for the first time at #43.
For 2016, Hyundai's global registrations slipped back slightly to 4,864,000 vehicles (Focus2move estimates). As a result it lost its position as the #4 brand to Nissan. (Hyundai itself claimed sales of 4.91m units, though that included sales to dealers). The global portfolio is led by the Elantra sedan, which has held its position for several years as the #4 best-selling passenger car worldwide. Sales for 2016 were 788k units. It is now partnered by the bigger of the brand's two SUVs, the the ix35 (or Tucson), sales of which more than doubled in 2016 to 645k units. Former best-seller the Sonata has gradually slipped back though it remains within the top 50 global brands with volumes of 380k units, while the Santa Fe fell back to 338k units. Further down the global top 100 models are the sub-compact i20 (260k units) and Accent sedan (245k). Hyundai markets hybrid and electric technology under the Blue Drive banner. Its advanced Ioniq hybrid car launched in 2016, in competition with Honda's Prius, and it has also launched a luxury sub-brand, Genesis, to compete with Lexus, Mercedes and other super-premium automobiles. The newest addition to the model portfolio is the Kona urban SUV, launched in 2017. "N" is the banner for a line of high-performance versions of existing models.
Between them, Hyundai and Kia wholly dominate their domestic market with a combined share of around 65% in 2016. However sales across the whole Korean industry have been under severe pressure since 2002 as a result of the country's chronic economic instability. The Hyundai brand's domestic unit sales fell from over 790,000 units in 2002 to under 571,000 in 2008, before steadily recovering. The domestic total for 2016 was 655k units, equivalent to around 36% market share, but well behind past highs. Instead the company has set its sights firmly on the international market, and in particular, the three key markets of China, the US and India.
US sales have risen by over 600% since 1998, breaking the 500,000 barrier for the first time in 2010. For 2016, they hit a new high of 768k vehicles, up marginally on the year before. In 2005 Hyundai officially opened its first US factory to manufacture the Sonata, as well as the Santa Fe from 2006. A full size SUV, the Veracruz, launched in 2006, along with the Azera deluxe large sedan, initially in the domestic market. In 2008, the group's made its first entry in the international luxury market with the Genesis premium sports sedan, designed to compete with the likes of Lexus and BMW. A completely revamped version of the genesis relaunched in 2013. The Azera was introduced in the international marketplace in 2011, debuting in China. In some countries it is marketed as the Grandeur. The group's first hybrid, a version of the Sonata, launched in the US in 2011, and was followed in 2012 by the Blue On electric vehicle. A redesigned version of the Elantra was named as North American Car of the Year for 2012.
Sales in Western Europe have been less spectacular, dipping from a 2012 high of 444k to 405k. The i30 stationwagon leads the portfolio, accounting for a little under a quarter of sales. Other strong sellers include the i10 and i20 compacts and Tucson. In addition to its new US facility, the group has three factories in Korea, as well as assembly plants in India, Turkey, China and the Czech Republic, which make commercial vehicles as well as passenger cars and light trucks. The group has a partnership with BAIC to make passenger cars in China, and launched a similar venture with Sichuan Nanjun Auto in 2011 to enter the commercial vehicles sector. Sales of Hyundai vehicles in China have soared, topping 1m vehicles for the first time in 2013. The figure for 2016 was 1.13m units, down slightly from the year before. However, sales in 2017 have fallen sharply, reportedly as a result of a backlash against South Korean goods after the country installed a US-made missile shield. Sales have also been impacted by friction with local partner BAIC over sourcing of automobile parts. India is another key market, led by the Santro small car, which accounts for almost 75% of all units. Sales peaked in 2012 at 641k, but have slipped back sharply since then. Even so, Hyundai remains the clear #2 in India's automobile market with sales of 500k units in 2016, less than half the figure reported by local leader Maruti but more than double the next largest brand, Mahindra.
Kia Motors is an important business in its own right, with registrations reaching a new record level for 2016 at 3,315,000 vehicles. (Kia itself reported sales of 3,018,000 cars). That ranks it as the world's 8th biggest automobile brand. It is controlled by Hyundai via a 34% shareholding. (Most of the remaining shares are publicly owned). Kia is positioned as Hyundai's "vibrant and distinctive" sibling, a maker of quality vehicles with "the power to surprise". In addition to its facilities in Korea, Kia Motors now has two factories in China (in a joint venture with DongFeng Motors) and one in Eastern Europe in Slovakia. The company began construction of its first US factory in 2006 in Georgia, which commenced full production in 2009. China became the brand's single biggest market for the first time in 2013, and sales have continued to rise, hitting 684k units for 2016. Kia has performed better than its larger sister in the important US market, closing the gap on its stablemate in 2016 with sales of 648k vehicles. Like all manufacturers, Kia's Korean sales have come under pressure, settling at 535k units in 2016, or around 29% market share.
Like Hyundai, Kia produces a full range of vehicles from passenger cars to trucks and buses and military vehicles. Its best-selling model by far is now the Sportage compact SUV. Sales have soared over the past five years, coming in at just below 554k units in 2016. That put it a little way outside the Top 20 models globally. It is supported by the subcompact Rio (marketed as the Pride in South Korea) with sales of 450k units, and the K3/Forte/Cerato sedan at 437k units. To facilitate a new push into more sophisticated markets, Kia was able to poach respected German designer Peter Schreyer, responsible for both the New Beetle for VW and the original Audi TT, to become its new chief design officer in 2006. His first project was the Cee'd, a new European small car, available in several different configurations, and manufactured in Slovakia. It was Kia's first model to be designed and built by Europeans. To support sales, it was sold with a seven-year warranty, unrivalled by any other manufacturer in Europe. The Soul is a compact crossover targeting the US market in particular. More recent introductions include the Niro small SUV and K2 small sedan. The group also makes heavy commercial trucks and coaches for its domestic market.
Hyundai has been a sponsor of FIFA football tournaments, including the World Cup, since 1999 and was joined by Kia from 2006. The partnership currently runs to at least 2022. The group also has personal endorsement contracts with Spanish footballer Iker Casillas, and Kaka and Oscar of Brazil. It also supports UEFA football tournaments in Europe, ICC cricket FIS ski jumping, PGA golf and, since 2015, the US NFL. In addition to its FIFA involvement, Kia has sponsored the Australian Open tennis tournament since 2002. The group is also a keen sponsor of artistic events and installations, especially under the Hyundai banner. Among other projects it hosted the "Rain Room" and other installations at the Los Angeles Museum of Art in 2015 and 2016, similar commissions at London's Tate Modern, and sponsors the Korean presence at the Biennale art festivals in Venice and Sydney.
Several other companies carrying the Hyundai name now operate independently from the Hyundai and Kia automobile companies. Some of these operate under the overall umbrella of Hyundai Motor Group, which is the main vehicle of Mong-Koo Chung, eldest son of the founder of Hyundai. It has a large collection of automotive parts businesses, of which the most significant is Hyundai Mobis, which is also the main shareholder in Hyundai Motor Company, with around 21% of equity. Chairman Chung Mong-koo directly holds a further 5%.
Hyundai Automotive Group also houses KEFICO, a joint venture formed in 1987 with Mitsubishi and Robert Bosch of Germany to manufacture engine systems, and auto components manufacturer Hyundai Mobis. In 2004, Hyundai Motor sold a 38% stake in its car finance subsidiary Hyundai Capital Services to GE Consumer Finance for around $375m. It also has a controlling 45% stake in credit card company Hyundai Card.
The advertising agency Diamond advertising, formerly a Hyundai subsidiary, was sold to Cordiant Communications for around $100m at the end of 1999, and is now owned by WPP. It operates as a unit of WPP's Ogilvy network. Hyundai Motors launched a new ad agency in 2005, Innocean. This has a fast-expanding global presence and is gradually taking over the account for both Hyundai Motors and Kia.
A separate set of businesses are controlled by other members of the Chung family. Hyundai Heavy Industries was also spun out from the old Hyundai chaebol, and is now a completely separate entity. It is the world's largest shipbuilder and also comprises a wide variety of other heavy manufacturing companies including Inchon Iron & Steel, Hyundai PetroChemical and Hyundai Pipe. Hyundai Corporation is a general trading company dealing in export, import and cross trading, is now controlled by a committee of the group's creditors. Previously the company acted as the principal agent for other Hyundai businesses, as well as in its own specialised areas. It now invests in a variety of technology and energy projects around the world, and also competes with other former group companies in areas such as construction and shipbuilding.
The remaining businesses within the old Hyundai Group are led by Hyundai Engineering & Construction, Korea's biggest such firm with a huge portfolio of international projects, and shipping company Hyundai Merchant Marine, both of which are part publicly owned. The latter is controlled by another but separate family-controlled entity, Hyundai Group.
Following its sale, Hyundai Electronics renamed itself Hynix Semiconductor in a bid to disassociate itself from the rest of the group. However the business has struggled ever since in the face of a sharp fall in global prices for memory chips and huge interest payments. For much of 2001 the company was involved in protracted negotiations with its creditors over a complicated debt-equity swap that would allow it to continue trading. In October that year, all 14,000 Hynix employees agreed to take a month's unpaid leave in a bid to help rescue the company from collapse. Finally creditors agreed a rescue package, swapping a chunk of the company's $7bn debt for equity. An attempt to sell the company's memory chip operations to US rival Micron Technology collapsed in 2002. Meanwhile competitors in the US and Europe complained that the continuing support of Hynix by its creditors, who issued three multi-billion Won rescue packages in 2001 alone, breached world trade rules. This led to the imposition in 2002 and 2003 of crippling taxes and duties by US and EU regulators. After struggling on for a further year, Hynix agreed to sell its non-memory chip business to Citigroup Private Equity in 2004 for around $820m. The rest of the business was acquired by rival chaebol SK, becoming SK Hynix.
Hyundai Motor Company reported revenues of KWon 93,649bn ($80.5bn) in 2016, up 2%. Net income has fallen back dramatically from past highs, down from over KWon 9 trillion in 2012 to KWon 5,720bn ($4.9bn) for 2016.
Kia Motors reported record revenues of KWon 52,713bn ($45.3bn) for 2016. Net profits rose 11% year on year to KWon 2,755bn ($2.4bn), though they are still well below 2012 and 2013 levels.
Parent entity Hyundai Motor Group reported combined revenues from its various activities of $221.9bn in 2016 and net profits of $12.2bn. Automobiles accounted for 52% of revenues and automotive parts for a further 22%.
Chung Mong-Koo is chairman of both Hyundai Motors and Kia Motors. He owns a direct 5% shareholding in Hyundai Automotive Group, and just over another 20% through related companies, making him Korea's wealthiest man. His son, Chung Eui-Sun is a director of Kia and vice chairman. Chung Sung-yi, Mong-Koo's daughter, controls group-owned agency Innocean. Hyundai Heavy Industries (HHI) is controlled by Chung Mong-joon, Korea's second wealthiest individual, and youngest brother of Chung Mong-Koo. He plays comparatively little part in the daily activities of HHI, devoting his time to politics in Korea and a role as vice-president of world football association FIFA. Hyundai Group is controlled by Jeong-eun Hyun, the widow of another brother, Mong-hun Chung.
The original Hyundai business was established in 1947 by chairman Ju-Yung Chung as Hyundai Land & Construction, one of many companies exploiting Korea's new-found independence from Japan. Chung had begun his working life as a construction worker during the 1930s, before opening an auto repair shop in Seoul in 1940. Three years later his business was seized by the Japanese government of occupation and merged with another company. Chung bought out a fleet of 30 trucks and began transporting gold ores. The profits from this were ploughed first into another auto repair shop, and then after the liberation of southern Korea by the US army, into Hyundai Civil Works Company. He picked up a series of lucrative contracts and by the 1950s, this little empire had been renamed Hyundai Land and Construction, with a growing network of subsidiaries engaged in commercial transportation.
Following the Korean War, Chung negotiated a series of ever-larger rebuilding projects from the government, expanding from buildings to bridges and public utilities. By 1960, Hyundai Construction & Engineering was the country's largest construction company. During that decade, the company began to take on work outside Korea, with projects in Thailand, Australia, Vietnam and Alaska. In 1967, Hyundai Motor Company was formed, initially with a contract to assemble Ford Cortina cars for the local market from imported kits. In 1975, Japan's Mitsubishi acquired a 15% stake in the business and backed the launch of Hyundai's own design - and Korea's first home-grown automobile - named the Pony. It was exported to other countries, but couldn't begin to compete with more sophisticated Western designs. (Canada's Globe & Mail newspaper later included it among the 10 worst cars ever sold in that country, likening it to "a Honda Civic built in a back alley by an inebriated blacksmith".)
Meanwhile, like its rivals LG, Samsung and Daewoo, Hyundai quickly moved into a wide variety of other industries, backed by lavish financing from the Korean government, which saw these fast-growing chaebol as the spearhead for the country's international development. In 1976, the group won the contract to build what was then the world's biggest ever construction job, the Jubail Industrial Harbour oil terminal port facility in Saudi Arabia, with a budget of $930m. By the close of the 1970s, Hyundai was involved in shipping, heavy industries, power plants and petrochemicals as well as construction and car manufacturing.
During the 1980s Chung headed the Korean Olympic Committee, wining the contract for the Seoul Olympics of 1988. Meanwhile the group moved into high tech industry, establishing Hyundai Electronics in 1983. Three years later, the group launched its car business into the US with enormous success, selling over 52,000 Pony models (rebranded as the Excel) in the first four months alone. Chung grabbed headlines again two years later as one of the figureheads of a move to establish some degree of harmony with North Korea. This led to the development of Mt Kumgang, a holiday resort jointly funded by North and South Korea. Hyundai Group pumped $400m into the project through its Asan Corporation subsidiary.
The 1990s were not quite as productive for the group. In 1992, Chung ran unsuccessfully for president of Korea. After his defeat the new government took its revenge by holding back loans, and springing tax audits on his group. Meanwhile Hyundai's rivals overtook it in the electronics market, despite the group's purchase of US businesses Symbios from AT&T, and diskdrive maker Maxtor. In 1996, Chung handed control of Hyundai to his son Mong-Koo. That year the group set up an investments arm, acquiring Citizens Investment Trust Management. But the Asian crisis took another turn for the worse. Symbios was sold, and the group floated a majority stake in Maxtor.
In 1998, Hyundai Motors joined with two of the country's banks to take over failing rival Kia Motors. Founded in 1944, Kia was originally a manufacturer of bicycles, and later motorcycles. In 1962, the company launched its first automobile, the Kia three-wheel light cargo truck, followed by a passenger car, the Brisa, in 1974. By the end of the decade it had become the local assembly plant for Peugeot and Fiat, and Ford became a shareholder in the 1980s but later pulled out as a result of Korea's growing economic problems.
Under pressure to reform their complicated interlinked corporate structures, Korea's chaebol began swapping assets in 1999. After several months of talks, Hyundai acquired rival LG Group's semiconductor business and merged it into its own electronics division, becoming the world #2 chipmaker behind Samsung. Ironically, the fall-out between Hyundai and the Korean government during the 1990s stood the group in good stead for the next president Kim Dae-Jung's purge of the chaebol. Less burdened by debt that its rivals, Hyundai was also quicker to begin reconstruction. Originally the group pledged to split itself up into five independent businesses by 2005, by selling off or merging weaker or non-core subsidiaries. Between the end of 1998 and the end of 1999, Hyundai reduced the number of its subsidiary businesses from over 70 to just 26. As a result, the group announced it would aim to complete the restructure two years earlier than planned, in 2003.
However, the break-up was repeatedly marred by internal divisions within the Chung family. By early 2000, founder Ju-Yung Chung had passed control of the group and its subsidiaries to his sons. But they began to squabble over who would inherit the best parts of the business. At the beginning of the year eldest son Mong-koo, head of the cars division, was publicly criticised by his father, reportedly for attempting to seize control of the group's financial businesses. Younger son Mong-hun, generally regarded as a better businessman, was then named sole chairman of the group. A few months later, under pressure from the government, Ju-Yung resigned from management control of the group and announced that his two sons would also step down. However Mong-koo defied his father's order, refusing to resign and gaining the support of Hyundai Motor's board. Instead he made it clear he was intent on developing Hyundai Motor as a standalone business, selling a 10% stake to DaimlerChrysler for $420m. Hyundai Motors was established as a separate company in September 2000.
Shortly afterwards, another son, Mong-joon Chung, took control of the group's Heavy Industries arm and also bought it out of the group, leaving Mong-hun in control of the weakest parts of the business, including Hyundai Engineering & Construction and Hyundai Electronics, both on the verge of bankruptcy. Meanwhile, the group's financial businesses, also under Chung Mong-hun, suffered a sudden decline. In 1997 Hyundai Investment Trust & Securities had become the country's biggest brokerage following the enormous success of its Buy Korea investment trust, which attracted over $6bn in investment, mostly from small domestic investors, in just its first six months. But in 1999 the company became embroiled in a financial scandal when chairman Lee Ik-chi was charged with manipulating the share prices of companies within the Hyundai group.
Even more serious problems came with the collapse of Daewoo. Hyundai Investment Trust was left with huge losses on bonds it had issued on behalf of the rival chaebol. The South Korean government demanded that Hyundai and its family owners should contribute around $1.1bn to help pay off Hyundai Securities' substantial debts. A deal to sell the investment business to a consortium of US investors led by insurer AIG collapsed in 2002..
Meanwhile, it was hoped that Mong-hun's problems might finally be resolved by the death in March 2001 of Ju-Yung Chung. The founder's demise hastened the break-up of the remaining parts of business. But Mong-hun's situation worsened in 2002 when he was charged with secretly transferring $100m of funds to North Korea in order to persuade that country to take part in a historic summit between the two countries in 2000. The summit later won South Korean president Kim Dae-jung the Nobel Peace prize. Shortly before his trial, Mong-hun committed suicide. The investment companies were later sold to Prudential Financial.
Meanwhile, Hyundai Motors made rapid progress as an independent company, although it later fell out with partner DaimlerChrysler. The two companies had agreed to collaborate on a range of trucks for the Asian market through joint venture Daimler Hyundai Truck Co, but in 2003, they argued over competing passenger car subsidiaries in China. In 2004 DaimlerChrysler sold its stake in Hyundai Motor.
Despite the continuing growth of Hyundai, Korean investigators continued to look into the group's business dealings between 2002 and 2006, and following the death of Mong-hun, the focus of these enquiries came to rest on Hyundai Motors chairman Mong-koo. In April 2006, state prosecutors accused Chung of creating a slush fund used for political lobbying, and had him arrested on corruption and embezzlement charges to await trial. He was eventually released on bail after spending two months in jail. The trial took place later that year, and in a shock verdict, Chung was found guilty of embezzling about $100m of company funds and manipulating rights issues to the detriment of group affiliates. He was sentenced to three years in jail, but the sentence was later suspended, allowing him to remain free on bail pending appeals. That judgement was challenged in 2008 by state prosecutors, who argued that Chung should be jailed for six years. However, in June the South Korean high court quashed that challenge and upheld the three-year suspended sentence, putting a end to the case.
The group has also been badly affected since 2005 by a string of industrial disputes, which have dented productivity in Korea. Meanwhile, Chung Mong-joon of Hyundai Heavy Industries launched an attack on the former Hyundai Group, buying up a 27% shareholding in its Hyundai Merchant Marine subsidiary through the financial markets.
Last full revision 10th November 2017
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