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Hyundai: Giant Plans More Expansion

February 23, 1987|SAM JAMESON | Times Staff Writer

SEOUL, South Korea — South Korea's second-largest conglomerate made a name for itself in shipbuilding and construction. Its auto exports have attracted much attention and are expected to continue to grow. Now its electronics subsidiary plans a big splash in semiconductors.

Chung Se Yung, the new chairman of South Korea's second-largest business conglomerate, the Hyundai Group, sometimes has difficulty remembering how many companies he controls.

In the course of an interview, Chung paused to ask an aide, who told him the number was 28. Actually, it is 32, a company spokesman said later, and that includes only the big ones.

Still, Chung is certain that Hyundai will expand all of its activities, which last year reported net sales of $16 billion.

Even the group's shipbuilding and construction firms are making money, Chung said, and these are industries that are in recession in South Korea. Many construction companies, suffering from an inability to collect money due them for work performed in the Middle East, "are going bankrupt," Chung said. (The total owed them is $3.8 billion, according to a U.S. Embassy report.)

"But we are in a different class," Chung went on, even though Hyundai too "has a lot of money to collect."

The Hyundai Group made a name for itself by building South Korea's first major shipyard--and producing the first ship even before the yard was completed--and leading the way into the Middle East for South Korean construction companies with remarkably low bids.

Now its auto exports to Canada and the United States have attracted attention. It exported 200,000 autos to the American market last year and hopes to ship 330,000 this year.

Also, it is moving into high-tech products and plans to make a big splash this year with semiconductors from Hyundai Electronics. It has invested $300 million and three years in the preparatory work.

'Spreading All Over'

Chung said he expects to break even in the first year, with sales of $500 million, mostly in exports. He refused to go into detail, but newspapers have reported that most of Hyundai's sales will involve the 256-kilobyte dynamic random access memory semiconductor.

Chung fondly recalled a Hyundai construction contract, signed for $1 billion in 1974, to build the Jubail Industrial Harbor in Riyadh, Saudi Arabia. It was completed in 1980.

"The second-lowest bid was between $1.2 billion and $1.3 billion," he said. "Everybody said the gap was too big and that Hyundai would be in trouble. But we did very well on that contract."

Now, construction orders from the Middle East have fallen off sharply, but Hyundai, Chung said, is still getting contracts there, as well as in Asia and Canada. "We are spreading all over the world," he said.

He did not mention it, but Hyundai and four other South Korean construction firms won contracts totaling more than $100 million in the United States last year.

For years, Hyundai ranked as Korea's largest chaebol , or business conglomerate, but Samsung surpassed it last year by about $100 million in sales. And for years it has been cited by Koreans as the prime example of a family-owned big business, an image, Chung said, that makes him "very displeased."

Chung, 58, was named chairman of the group on Feb. 9 by his elder brother, Chung Ju Yung, 71, who founded the group and now has assumed the post of honorary chairman.

Seven other Chungs--another brother and six of the eight sons of the founder--hold executive positions in Hyundai companies. Yet another son, who is studying in the United States, is in the wings. Chung Ju Yung's eldest son also served in Hyundai companies until he was killed in an auto accident in 1982.

Still, the eight Chungs account for only a small number of Hyundai's top-level executives, the chairman insisted. And he said that all the other chaebols are run either by the founder or a son of the founder.

The magazine Business Korea reported in its January issue that no one knows the net worth of the Hyundai Group because "most companies are in a private domain made up mostly of Chung (Ju Yung) and his family members."

"Even those companies which are listed on the Seoul Stock Exchange are majority-owned by Chung (Ju Yung) or his family," the magazine said.

Already Changing

Despite its slow pace in conforming to government pressure to list Hyundai stock publicly, Chung Se Yung says the massive group is already changing. "The best man," he said, "will become president and the best man will become chairman" of any company in the Hyundai Group, regardless of family affiliation.

He bristles in the face of charges that Hyundai is a go-it-alone, "pure Korean" conglomerate.

"That's all nonsense!" he said. "We are very much willing to go with other international corporations, if we have mutual benefits."

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