[THE INVESTOR] Korea’s new antitrust chief said he has been discussing with Hyundai Motor Group to revamp its complex governance structure, calling it a risk for Korea’s largest auto group. 

In a recent interview with Reuters, Korea Fair Trade Commission Chairman Kim Sang-jo said the family-owned Hyundai’s cross-shareholding structure -- headed by Chairman Chung Mong-koo -- has caused a “big governance risk” for Hyundai, urging the firm to resolve the issue as soon as possible. 

“Many people, including me, are telling Hyundai that they shouldn’t waste time in dissolving the cross-shareholding structure,” Kim was quoted as saying. “I’m in ongoing talks with Hyundai.” 

Kim, nicknamed “chaebol sniper” for his longtime shareholder activism added that Hyundai recognizes its corporate governance conundrum and is trying to resolve it. 

Hyundai’s corporate governance issue came into the spotlight recently after new Korean President Moon Jae-in -- who is determined to reform large conglomerates in the country -- assumed office in May. 

Kim, who was handpicked by Moon, has said Hyundai is the only company in Korea where interlocking shareholding structure plays a vital role in maintaining and succeeding the founding family’s control. 

Hyundai Motor Group’s circular structure starts from auto parts maker Hyundai Mobis, which owns 20.8 percent shares of Hyundai Motor. Hyundai Motor has a 33.8 percent stake in its sister affiliate Kia Motors, which holds 16.9 percent shares of Hyundai Mobis to complete the circle. Under this structure, Chung can control all the affiliates, with a 6.96 percent stake in Hyundai Mobis and 5.17 percent share in Hyundai Motor. 

Industry experts expect the auto giant to set up a holding company, tentatively named Hyundai Motor Group Holdings, as a plausible restructuring scenario. 

Under the plan, Hyundai Motor, Kia Motors and Hyundai Mobis will be divided into investment and business divisions, with the goal of combining three investment divisions to form a holding company. The shift to a holding company structure will cost about 1.7 trillion won (US$1.50 billion), which is relatively smaller than other likely scenarios, according to local brokerage firm eBest Investment & Securities.

By Ahn Sung-mi (sahn@heraldcorp.com)