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Will growing corporate scandal derail Hyundai's future?
With Hyundai chairman Chung Mong-koo (right) arrested and jailed Friday for alleged embezzlement
and political slush funds in South Korea, the question is: Will the automaker continue to grow at a breakneck pace, or
will mounting legal troubles conspire to take it down a peg or two? The Hyundai executive has been released, but the
ramifications for the automaker (legal and otherwise) would appear to be just beginning.
Earlier this year, the company's stock was worth $98/share, but its value has dropped to $89 as of Friday, and it's expected that the company will endure a 7 percent decline in profits in the first quarter. However, as it remains unclear how deep the company's wrongdoing extends, it will be difficult to gauge just how the scandal will affect the automaker's day-to-day operations, let alone its long-term future.
What do you think? Will Hyundai and Kia's corporate unrest unravel this automotive juggernaut, or is all of this just a speed bump on the road to greater profitability and market share? Sound off in 'Comments.'
[Sources: CNNMoney.com; BayNews9.com; ChinaDaily.com]
Reader Comments (Page 1 of 2)
Leo 10:27AM (4/30/2006)
Not just this scandal, but also their anti-American leadership, authoritarian management style and lack of trust in Americans as leaders will doom them.
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Glenn Laycock 11:09AM (4/30/2006)
Hard to say. Depends on how powerful and fearless the investigators are. Government(s), politicians ... all can lead to cover ups. Also there could be a conflict of interest as the people investigating ultimately will not want to damage the company. It is the old, "it ended up working in all of our favour, so it was illegal but .. well we are more successful because of it, so it was a service these unethical people did."
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D 12:23PM (4/30/2006)
I agree with #1
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Ray 12:54PM (4/30/2006)
It's a shame that chairman Chung had to stoop to such a
low business practice. Unfortunately graft in business and government is a practiced way of life in some Asian countries. But that still does not condone his actions.
Amen to Leos comment. He is right on target about Koreans trusting American managment. If Hyundai wishes to become a number one tier company in the USA they will need American managent to sell their products here. Just ask the Japanese.
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Ray 12:59PM (4/30/2006)
It's a shame that chairman Chung had to stoop to such a
low business practice. Unfortunately graft in business and government is a practiced way of life in some Asian countries. But that still does not condone his actions.
Amen to Leos comment. He is right on target about Koreans trusting American managment. If Hyundai wishes to become a number one tier company in the USA they will need American managent to sell their products here. Just ask the Japanese.
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Schira 2:05PM (4/30/2006)
It depends on their strategy and products.
http://news.bbc.co.uk/2/hi/business/4954906.stm
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Richard Warren 5:02PM (4/30/2006)
In a word, No
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J Roberts 7:08PM (4/30/2006)
Funny thing is that both Hyundai and Kia DO employ Americans in their key U.S. management positions. I don't see that as a great plus considering how well the Americans run their own car companies like GM and Ford. Both are losing tons of money as a result of poor management decisions. Koreans are slave drivers in many ways, but they are also good people who don't deserve the sterotype casting done by a few who know nothing of the Korean culture.
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iQuack 8:14PM (4/30/2006)
Hyundai buyers are bargain shoppers who either know nothing nor care about a scandal that might as well be 1,000,000 miles away.
As far as most people are concerned, there's been a scandal-a-day anyway: Enron, WorldCom, Adelphia, Mitsubishi, along with a number of companies like GM that have had to restate their earnings because of accounting errors.
Hyundai buyers aren't interested in any of this--they just want to know what the monthly payment will be on that new Sonata.
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Kirk 10:02PM (4/30/2006)
I couldn't agree with #9 (iQuack) more. People who go shopping for a car could care less what the Chairman did. It has no effect on that car's quality which is great. I guarantee you more people care what JD Power says than what the Chairman does with his personal decisions.
As far as Korean Management not trusting American management, I couldn't disagree more. All the Korean managers at the US plant are very trusting and respectful to the Americans and are great to work with. If you worked at Hyundai Alabama and you could see for yourself.
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stimr2 11:28PM (4/30/2006)
In Korea most people are against the government for going after Hyundai. There's a lot polictial baggage involved. Samsung was the government's target couple months ago. Also this scandal was brought into the light when a lobbyist was investigated in the scandal involving the Lone Star fund which happens to be based out Dallas, TX
From some of the comments on this website it seems a lot people don't really know anything about Korea or have very negative feels toward Korea. Yes, there is some Anti-American sentinment but there are various reasons for that. The causes being the fault on both sides. Korea has grown up and become a deomcracy. Because of that Koreans feel they longer need to live under the shadow of their big brother America. However, Korea is still a strong supporter of the US. US and ROK soldiers have been training and fighting along side each other for decades. They proved themselves in the Korea and in Vietnam. Can China or Japan say that they fought and died along side Americans.
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stimr2 11:34PM (4/30/2006)
Also current ruling party of South Korea are idiots. They're more communist than capitalists. They're destorying Korea's business sector.
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VL 8:45AM (5/01/2006)
Does Hyundai have significant research and design? If so, which products show they have capability of innovation and creativity?
They've just started to get a handle on their quality control, and are already making claims against the segment leaders. When the Chinese cars flood the world market, the "value" buyers will have more options. They'd need to raise the bar.
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Sir Fatty 9:12AM (5/01/2006)
I won't be buying another Hyundai... but it has nothing to do with this. It has to do with my '03 Tiburon's premature clutch failure and thier unwillingness to support thier customers.
I think the long warranty is going to eat thier lunch.
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Puff Chippy 9:14AM (5/01/2006)
If they can manage to get their legendary poor quality up to even average standards no one will care about a scandal. Look at how corrupt American business have become - do you see anyone really caring about that? Some do but not enough to make a difference. Most people want the lowest price regardless of the consequences.
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nanotube 10:38AM (5/01/2006)
The buyers won't care, so sales will be as good as they were going to be anyway. The effect will more likely be in long-term planning, R&D, buisness decisions, etc. Sounds like their CEO was a micromanager so hopefully someone will step up and take charge quickly and keep Hyundai on a steady course. Hyundai is on a good course increasing their quality and reliability. Their newer products are an amazing value - just hope they can keep the prices reasonable with the Won and these problems.
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bob 8:38PM (5/01/2006)
This is a tiny little bump in the road for Hyundai/KIA. As far as people saying Hyundai is anti-american in their business pactices is completely faulse. In the state the big 3 lobby politicians on a daily basis. Its illegal in South Korea and they got caught. So what. They will make it go away with even more money to be donated to a Korean charity. People dont buy cars based on business practices, they look for quality and affodibility, something the big 3 forgot about years ago.
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Big Mac 10:46PM (5/01/2006)
I've done business in Korea many times since the 80's. In fact, I would say that Americans are treated like royalty. They've always shown me the upmost respect and they are extremely warm and friendly. However, there has been an Anti-American sentiment growing there as well as in other countries. The Koreans have historically been our strongest and most staunch ally in Asia. But one of the factors I've noticed in the Anti-American sentiment has been the vile actions of our military. The Anti-American sentiment is strongest in the military towns and with good reason. Let's face it, the US military doesn't recruit the brightest, cultured, or most talented individuals of our society. They are usually teenagers who can't get into college, and can't find work. Being a teenager and hitting their puberty peak, I wouldn't say they think clearly or even at all.
This problem isn't just isolated to Korea, but to Japan as well. I've traveled to Japan numerous times for business and I must admit, they treated me like royalty in the 80's and early 90's as well. But in recent times I've traveled there, I have been verbally threatened and harassed by local Japanese on more than one occasion. The numerous rape, beating, and murder allegations by the military has had a negative effect on the image of an "American." Of course these military soldiers are rarely punished and go back to their bases in the morning after their raucous nights. A typical evaluation of Koreans and Japanese living in military towns is this: "They (US military men) go out and commit their sexual crimes in the middle of the night and then crawl back to their base hiding behind the fortified gates."
There are of course many other factors in the Anti-American sentiment, such as our spoiled, xenophobic, arrogant, bitter, hateful, ignorant, and ungracious attitude at the social, political, and cultural level. Just take a look at the first couple of posts on this blog. Clearly, these bloggers don't know many Koreans or haven't traveled to Korea. They just reiterated an opinion of a former Hyundai employee who was MOST LIKELY fired for being inefficient, incompetent, or unskilled for his position. Of course the side you would take is your friend's opinion, because well.. he is your friend or an acquaintance. One of the differences I've noticed in the cultures is that Koreans are very efficient and accurate. Most of my Korean employees and students would finish a task that they knew needed to be done without my instruction. That's not the case with an American employee or student. They sit around and do nothing, unless they are instructed to do so. If I asked for a 25 page assessment on quality management/control at one of our sectors, I would receive it the next day. I ask for the same thing to an American employee, I get excuses, complaints, and excuses.
In my honest appraisal as a former University professor, the Asians, are more highly skilled, intelligent, efficient, gracious, and intuitive than your typical American. They are the hardest working and most overachieving group of students I have ever taught. They also have a social grace and etiquette that distinctly separates them from other students. They were always gracious and humble when they came in for extra help during office hours. On average, they would have the highest test scores and show mastery of the difficult concepts that most of my students struggled to understand. Yet, with the high test scores and clear mastery of the subject, they had the lowest self-efficacy of any student population... again, showing their humble nature and the self-awareness that they can always improve. Many of my colleagues agree with my assessment and they've taught from the high school to University levels. Asians make up 4% of the US population, but account for over 25-50% in many elite US Universities. Don't believe me? Take a stroll through the Harvard, Stanford, Northwestern, University of Chicago, U Michigan, Cal Tech, MIT, Yale, UC Berkely, UCSD, UCLA, and UC Irvine campuses and you'll know what I'm talking about (of course there are many more universities but you get my drift). It isn't a mystery why they are the most successful minority group in the US, especially with the myriad of challenges that first and second generation immigrants must face. There is a contrasting difference between the typical Asian and American. Cultural ignorance and lack of social grace exemplifies the typical "American."
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XJ 11:30PM (5/01/2006)
Big Mac = Korean American. Gaurenteed.
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mikesright 3:05AM (5/02/2006)
OK Big Mac. Impress me with your big words, you stereotyper. You might not have stepped into a big-time ivy-league university today, but more than 50% of the students are still white, and the other 50% are not Koreans and other Asians. Besides, the real issue here is whether or not this company will survive a scandal like this ripping apart the company. It will, and already has. They have already donated their Globis shares to charity, and if both leaders of Hyundai and Kia go down (mind you, these two have built the company where it is now) it will continue a downward spiral, akin to what happened to Ken Lay at Enron. In addition, market forces from China will come in and destroy the Koreans with their own value proposition, and they will take over the value segment. Obviously, these guys weren't too smart if they were violating codes of ethics and laws in their own country. Now after your lesson here, go grade your homework and get to bed, it's a school night.
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