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The Hyundai Automotive Group is feeling growing effects from a criminal investigation into massive corruption in the group, with one overseas project after another falling victim to the scandal.
Kia Motors on Thursday canceled a plan to build a completely-knocked-down (CKD) plant in Southeast Asia due to expected difficulties in decision-making as prosecutors requested an arrest warrant for the group chairman Chung Mong-koo and have indicted his son, Kia Morots chief Chung Eui-sun. CKD production is a kind of part-assembly where all parts are exported to a local plant that manufactures the cars. Kia had planned to start building a CKD plant in a Southeast Asian country within the year to produce 100,000 passenger cars and recreational vehicles annually by 2009 and expand the number to 200,000 cars after that.
Earlier, Korea¡¯s largest motor group indefinitely postponed the start of construction of plants in Georgia, U.S. and the Czech Republic scheduled for April and May respectively. International press reports on Friday quoted Czech Premier Jiri Paroubek as saying he or the country¡¯s industry and trade minister will soon visit Korea to discuss the deal with Hyundai Motor.
The effects of the investigation are also likely to affect the group¡¯s business results. Kia already posted a mere W32.2 billion (US$32.2 million) in operating profits in the first quarter of the year, less than 1 percent of its sales of W4.386 trillion. Net income also fell 80.1 percent year-on to W38.4 billion. Song Sang-hoon, an analyst with Hyundai Securities, said those results are mainly due to a stronger won, but since the investigation is capable of tarnishing the firm¡¯s brand image, business results could get worse in the second quarter.
(englishnews@chosun.com )
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