For a long time Hyundai was South Korea’s largest chaebol (business conglomerate). At its height it employed 200,000 people, embraced 80 companies and earned $90 billion a year and produced everything from cars to ships to computers. In the early 2000s, it was broken up and was displaced by Samsung as South Korea’s largest conglomerate. At the time of the Asian Economic crisis in 1997-98, the company suffered from internal divisions and mismanagement. Most of the large subsidiaries were billions of dollars in debt. The entire chaebol owed around $50 billion. Creditors took over shares and the government forced the conglomerate to reform and restructure.
Hyundai is the 2nd largest chaebol if Hyundai Motors and Hyundai Heavy Industries Group are grouped together. Hyundai Motors 3rd largest chaebol and Hyundai Heavy Industries Group is the 5th largest chaebol if they are separated
Hyundai family group — US$179 billion — 204.4 — Motors + Heavy + insurance + trading
Name — Revenues in US$ — Total Assets — Industries
Hyundai Motor Group — US$94.5 billion — 128.7 — Automobiles, steel & trading, including Hyundai Motors — US$70.4 billion — 103.2 — Motors
Hyundai Heavy Industries Group — US$27.6 billion — 42.8 — Heavy industry (including Hyundai Mipo Dockyard)
Hyundai Oil Bank — US$ 13 billion — 4.8 — Energy
Hyundai Mobis — US$12.2 billion — 10.4 — Motor parts
Hyundai Steel — US$9.9 billion — 12.2 — Steel
The Hyundai Group includes Hyundai Motor Company, South Korea’s largest automaker, founded in 1967; and Hyundai Heavy Industries, the world’s largest shipbuilder, founded in 1973. Hyundai Electronics, a major chip maker founded in 1983, was spun off as Hynix in 2001 and renamed SK Hynix in 2012. The conglomerate also includes oil refining, department stores. banking, shipping and hospitals
Chung Ju Yung divided Hyundai among his six surviving sons. Before his death in 2001, he split his holdings, making Hyundai Motor and affiliate Kia Motors as an independent chaebol. Hyundai Motor Co became a publicly traded company. Hyundai Motor Co, Hyundai Heavy Industries Co., the Hyundai Group and other divisions operated independently after the Hyundai Group was restructured after the 1997-1998 Asian Financial Crisis. The problems and debts incurred by Hyundai Engineering & Construction accelerated the break up of Hyundai and set of an internecine war between the Chung brothers for control of it parts.
Hyundai Motor Company had 104,731 employees in 2013. Hyundai Motor Group has been the parent company since 2000. Its divisions are Genesis, Ioniq and Kia. The production output was 4,858,000 units in 2016.
Revenue: US$92.3 billion
Operating income: US$3.2 billion
Net income: US$2.8 billion
Total assets: US$170 billion
Total equity: US$67.2 billion [Source: 2019, Wikipedia]
Hyundai Heavy Industries Group had 25,903 employees in 2012 and was founded in 1972
Revenue: US$39.3 billion
Operating income: US$1.3 billion
Net income: US$1.16 billion
Total assets: US$170 billion
Total equity: US$67.2 billion [Source: 2019, Wikipedia]
Hyundai Engineering and Construction was South Korea’s largest civil engineering firm. Founded in 1947, it was the parent company for the Hyundai Group. In 2000 it employed 100,000 people and had racked up $5 billion in debt and faced a situation where it either had to reform or go bankrupt.
Hyundai now contains:
Hyundai Group, parts of the former conglomerate which have not been divested
Hyundai Asan, a real estate construction and civil engineering company
Hyundai Motor Group, the automotive part of the former conglomerate
Hyundai Motor Company, an automobile manufacturer
Hyundai Rotem, a manufacturer of railway vehicles, defense systems and factory equipment
Hyundai Engineering & Construction, a construction company
Hyundai Heavy Industries Group, the heavy industry part of the former conglomerate
Hyundai Heavy Industries, the primary company representing the group
Hyundai Corporation, a trading and industrial investment company
Hyundai Mipo Dockyard, a shipbuilding company
Hyundai Oilbank, a petroleum refinery company
Hyundai Samho Heavy Industries, a shipbuilding company
Hyundai Department Store Group, the retail division of the former conglomerate
Hyundai Department Store, a department store chain
Hyundai Development Company Group or HDC Group, a diversified part of the former conglomerate
Hyundai Development Company, a construction and civil engineering company
Hyundai EP, a manufacturer of petrochemicals and plastics
Hyundai Fomex, a professional lighting manufacturer [Source: Wikipedia]
Chung Ju Yung: Founder of Hyundai
Chung Ju Yung (1915-2001) was the founder of Hyundai. Symbolizing everything that was good and bad about Korean business, he launched his company with hard work and moxy, built it into a huge chaebol with help from the government but ultimately presided over decline brought about waste, failure to make reforms, poor decision-making and cronyism.
Chung for many years was the richest man in South Korea and one of the richest in men in the world. According to Forbes magazine in 1996, Chung Ju-yung was the 9th richest man, with an estimated $6.2 billion, a 72 percent increase from 1995, most of which was attributed to changes in South Korean disclosure laws. He was ranked behind Microsofts's 1) Bill Gates ($12.9 billion), 2) U.S. investor Warren Buffet ($10.7 billion), 3) Swedish industrialist Hans Rasuing and Japanese real estate mogul Yoshiaki Tsutsumi (both worth an estimated $9.0 billion), 5) Switzerland's Paul Sacher ($8.7 billion), 6) Taiwan's Tsai Wan-lin ($8.5 billion) and 7) Hong Kong's Lee Shau Kee and Canada's Kenneth Thompson ($6.5 billion). [Source: Forbes]
Aidan Foster-Carter wrote in The Guardian: As the founder and driving spirit of Hyundai, South Korea's largest industrial conglomerate, Chung Ju-yung personified his country's ascent from poverty to global success. He devoted his last years to opening contacts with North Korea, but he also saw Hyundai fall into debt and criticised as outmoded, and witnessed his sons battling for his mantle. He was, nonetheless, a larger-than-life figure.” [Source: Aidan Foster-Carter, The Guardian, March 28, 2001]
Stephen Evans of the BBC wrote: “It should be said that” Chung “was not in that first wave of corrupt business leaders. He earned his money the hard way, born a peasant who left home to labour on building sites and then to form his own construction company. Initially, he made cars in Ulsan but then turned to shipbuilding. He was supremely ambitious and supremely confident - legend has it that he toured London seeking finance and when it was pointed out that South Korea had no shipbuilding industry, he took out a Korean bank note on which was a famous ship from the 16th Century. He was also supremely careful with money. In the company museum at the Ulsan shipyard, there are two pairs of shoes which Mr Chung is said to have worn for 30 years, getting them constantly repaired despite being a multi-billionaire. [Source: Stephen Evans BBC News, May 30, 2015]
Chung Ju Yung’s Early Life
Chung was the son of a poor farmer in Tonchon, Kanwon Province in North Korea. The eldest of seven children, He was born in 1915 in Japanese colonial Korea and had little formal education. Even so he dreamed of being a school teacher and attended classes at a Confucian school when he had free time. His first taste of business was selling firewood in a nearby town. When he was 16 he ran away to the town of Kowon a worked long hours there as a construction worker, happy to earn money independently. [Source: Wikipedia]
Chung’s home village was named Asan, a name later attached to his North Korean business venture. When he was 18 he stole his father’s cow and sold it and used the money for a train ticket to Seoul to make his fortune. Later he returned 1,000 cows to North Korea as a kind of gesture of thanks.
Chung came to Seoul as a teenager in the 1930s. After he arrived in Seoul, Chung enrolled in a local bookkeeping school hoping to start a career as an accountant. After two months his father found him and hauled his ass back to Asan. Chung escaped again and this time didn’t go back for some time. He learned several trades, worked on the docks and as an errand boy for a rice mill. He did construction work at Boseong Professional School and worked as a handyman for a starch syrup factory.
Chung began his entrepreneurial career, delivering rice from a bicycle for the Bokheung Rice Store in Seoul. He won the praise of the rice store's core customers and so impressed the store’s owner he became the store's accountant after only six months and began to develop his business sense. In 1937, the owner of the rice store became ill and gave the store to Chung. At the age of 22, Chung took over the store, changed the name to the Kyungil Rice Store and made healthy profits until early 1939 when Japan, with its war efforts ramping up, imposed an oppressive rice-rationing system, driving Koreans out of the rice trading business.
Creation of Hyundai
In 1940, Chung was able to buy an auto repair shop with a loan from a friend and started a trucking business which grew into a large construction company during the waning years of the Japanese occupation. The number of employees grew from 20 to 70 and Chung earned a decent income. In 1943, the Japanese forced the garage to merge with a steel plant as part of the war effort. The Japanese eventually took over the business but Chung had saved enough money so he was ready for new challenges when World War II and the Japanese occupation of Korea was over in 1945. After World War II, Chung developed business relations with the U.S. military and won construction contracts from them and the government of Syngman Rhee. [Source: Wikipedia]
Aidan Foster-Carter wrote in The Guardian: In 1946, founding Hyundai - the word means "modern" in Korean - as an engineering and construction firm. American military contracts during the Korean war were an early boost. But Chung and Hyundai really took off after General Park Chung-hee seized power in 1961, and began South Korea's forced-march towards industrialisation, which rewarded favoured firms with cheap credit and expansion opportunities.
Chung started Hyundai and Hyundai Civil Industries in anticipation of the post-war reconstruction and industrialization. He won some major government infrastructure contracts. During the North Korean invasion of 1950, Chung abandoned his construction projects and fled with his younger brother to Busan for safety. Hyundai Construction won contracts with U.S. forces in the Korean War to build facilities for American military personnel. His younger brother could speak English and was friendly with U.S. Army engineers. His son, Chung Mong-joon was born in Pusan. After Seoul was retaken by U.N. forces, Chung reorganized his company and it grew on the back of more work from the Americans.
Hyundai, Chung Ju Yung and Park Chung Hee
Under Park Chung Hee, who took power in 1961, Hyundai won contacts to build bridges dams, roads and railroads Chung’s companies became responsible for building much of South Korea's infrastructure and transportation networks, including the Soyang Dam in 1967, the Gyeongbu Expressway in 1970, the world's largest shipyard in Ulsan and the Kori Nuclear Power Plant. Profits were plowed into other businesses. As these businesses grew, their markets were expanded overseas.. There were large construction projects in the Middle East. His shipbuilding firm won contracts to build ships for customers all over the world.
Thayer Watkins of San José State University wrote: In the 1960's Chung came to the attention of the ruler of South Korea, Park Chung Hee, when he bid one won to reconstruct a bridge over the Han River that runs through Seoul. Park was impressed with his patriotism and his ability to finish a job ahead of schedule. In the late 1960's Hyundai was given the contract to construct the 260 mile highway between the capital Seoul and the second largest city of South Korea, Pusan, on the southern coast of the Korean peninsula. Hyundai also was constructing highways in Thailand and dredging facilities for the U.S. military in Vietnam in the late 1960's. [Source: Thayer Watkins Department of Economics, San José State University]
“Chung shared many of the values and goals of Park and they had a close personal relationship over the years. When Park decided that South Korea should build ships he chose Chung and Hyundai to create a ship-building company. Not only did Chung not have any experience in building ships, there was no one in South Korea that had built a ship larger than 10,000 tons and Chung was intending to build 260,000 ton oil tankers. Chung needed a loan of $60 million to build the ship yard. European bankers which Chung approached for this loan turned him down. Even the Korean Shipbuilding Association told prospective lenders that Chung's project was impossible. Nevertheless Chung eventually got the loan from British bankers and immediately got an order from a Greek shipper for two larger tankers.
“Supposedly the key step in Chung getting the loan is that when the British bankers asked him if Korea had any experience in building steel ships he pulled out a South Korean banknote that showed a picture of the iron-clad turtle ship built centuries ago to combat the Chinese navy. The tankers ordered by the Greek shipper were to be copies of ships that were being produced by a shipyard in Scotland. Chung bought the design and started construction of one of the ships as the shipyard was being constructed. Hyundai completed the ships by 1973 but the OPEC oil price increase depressed the oil transport business and the Greek firm refused to take delivery. Other customers also refused delivery. Only through considerable effort on the part of Hyundai and the South Korean government were alternate buyers found for the ships.
Building Hyundai Into a Massive Conglomerate
Aidan Foster-Carter wrote in The Guardian: Chung built Hyundai into a conglomerate of 86 firms - making everything, as it boasted, "from chips to ships". It built Korea's first cars, and its first motorway (against World Bank advice) from Seoul to Pusan. In the 1970s, Chung countered the Organisation of Petroleum Exporting Countries' oil shock by making Hyundai and Korea a major world force in construction. [Source: Aidan Foster-Carter, The Guardian, March 28, 2001]
“ His chutzpah and energy were legendary. In 1971, he got a loan from Barclays bank to launch a shipbuilding venture by waving a 500-won note with a picture of an ironclad warship made in 16th-century Korea. Because Hyundai's dockyard was too small, its first tanker was built in two halves. When the pieces would not fit together, Chung had them welded, set up a shipping business to use the vessel - and made another, which did fit, for his foreign client.
According to Forbes: “ An avowed Confucian, Chung Ju-Yung embodied his creed's virtues and vices. For more than 30 years, his six sons were summoned to breakfast with him at 5.30am, by which time he had been up for two hours, reading the papers and placing calls. He expected the same punishing work ethic of everyone. Fiercely authoritarian, he was said to hit managers and hated trade unions, an approach that led to pitched battles at Hyundai's shipyard at Ulsan. [Source: Forbes, April 26, 2011]
Thayer Watkins of San José State University wrote: “Hyundai was also involved in overseas construction projects. Chung wanted to expand this construction work to the Middle East but his younger brother, Chung In Yung, disagreed after the company lost $50 million on a highway project in Indonesia. Chung forced this brother out of the company as a result of this disagreement. Hyundai won $1.4 billion of construction contracts in the Middle East. [Source: Thayer Watkins Department of Economics, San José State University]
Hyundai in North Korea
Hyundai’s Chung Ju Yung, was the first South Korean corporate chief to visit North Korea. His family originally came from the North and he was born there in 1915 when all of Korean was under Japanese control. In 1989 he received permission to develop a resort in North Korea. In 1998, he walked across the DMZ with a gift of 501 head of cattle.
Chung returned from his first visit to North Korea in 1989 with a promise to develop Kumgang-san (Diamond Mountain) as a resort. Although North Korea later reneged on the project, Chung planned to lead a delegation of Hyundai executives to North Korea in 1992. Chung had five rules for doing business with North Korea: 1) don’t ask too many questions, 2) don’t smile, 3) don’t wear showy clothes, 4) sit up straight and 5) be patient.
Chung eventually won the right to develop the Kumgang-san resort under the name of Hyundai Asan (Asan was the name of Chung’s hometown in North Korea). Hyundai Asan organized and ran trips to Kumang mountain. It payed $400 million for the rights to conduct tours to Kumgang mountain — first by ship and late by roaad. .
The first Hyundai Asan trips to North Korea were in 1998. Hyundai Asan has invested US$942 million in Mt Kumgang. It took a total of 80,000 South Koreans to Mount Kumgang between November 1998 and June 1999, but the South Korean government suspended such trips after a South Korean tourist was arrested on spy charges. North Korea claimed that the number of tourists doubled in 2000 compared to 1999, but no actual figures are available for either year. Hyundai Asan saw saw its first profit, a modest US$650,000 in 2005. The trips to Kumgang were never really a moneymaking venture but was based more on idealism, with the idea being to promote peace and reunification through face-to-face contact between ordinary Koreans on both sides. [Source: Richard Lloyd Perry, The Times, November 23, 2006]
An estimated 550,000 people have visited the Kumgang area as of early 2003. By 2008, over 1.93 million made the trip to the North. In 2004 the land route was opened at a lower price — roughly half the $500 cost of a cruise. It was hoped this would raise the number of visitors to 300,000 a year in 2003 from 100,000 in 2002. Later South Korean tourists were able to cross the border and visit the North Korean city of Kaesong, the capital of the Goryeo Dynasty (918-1392), located just north of the DMZ, Hyundai Asan started the trips in 2007. In the meantime Hyundai planned to add a ski resort and golf course to the complex at Kumgang. In March 2008, Hyundai Asan began a private-car tour to Mount Kumgang resort in North Korea in which 20 vehicles from the South were allowed for the three-day tour to the North. But the whole operation — including tours to Kumgangsan and Kaeson — were shut down after July 2008, when a South Korean woman wandered into a restricted area at night, and was shot dead.
Losses by Hyundai in North Korea
As of March 2008, about 17.9 million vistors — mosly South Koreans — had traveled to the Mount Kumgang resort aboard buses or ferries. But by 2006 fewer South Koreans visited Kumgang. In April 2011, the North cancelled the business license of Hyundai Asan. Two months later, it unilaterally announced that it was transforming Kumgang into an international resort on its own. Hyundai lost investor confidence partly because its risky investments in North Korea. [Source: Associated Press]
Yonhap reported in 2014: Hyundai Asan Corp said Tuesday that its loss from the suspension of its North Korea tour programs is estimated at nearly 1 trillion won (US$909 million) over the past six years. The company said that it has also been forced to reduce its workforce by up to 73 percent. Before visits were stopped, the company employed 1,084 people to handle tours to Mount Kumgang and the city of Kaesong, but the staff has been slashed to just 285. [Source: Yonhap, November 18, 2014]
“The estimate is based on the assumption that some 300,000 tourists would have visited the scenic mountain and seaside resort on an annual basis if the ban was not placed. For Kaesong, Hyundai Asan said the loss in earnings was calculated on the premise that some 100,000 people would have visited the city per year. Seoul banned all tourists from visiting the isolated country after a North Korean guard shot a South Korean visitor dead in July 2008 at Mount Kumgang. South Korea said the North must formally apologize for the mishap and assure that the tragedy will not occur in the future.
“The halt in tourism to the mountain resort has cost the company 809.4 billion won, while losses brought on by a ban on tourism to the ancient city of Kaesong on the west coast, has ballooned to 125.2 billion won with the total reaching 934.7 billion won,” the company said. They added that if tours do not resume soon, the loss in earnings will reach the 1 trillion won mark.
The halt in tourism is particularly painful because the company, part of the larger Hyundai Group, invested 226.8 billion won in various facility investments and US$486.69 million to acquire land and operational rights from Pyongyang. Hyundai Asan said that despite troubles, it has a plan in place that can restart tours in two months, with its top executives still hoping that cross-border relations will improve so operations can resume.
Chung Ju Yung’s Later Career and Death
On one hand Chung was a fierce nationalist. He played a major role in Seoul's successful outsider bid to host the 1988 Olympics. He also had close relations with the U.S. When the US army wanted cemetery grass to look green for a visit by President Eisenhower in the 1950s, he transplanted 30 truckloads of barley shoots. But on the other hand he was a trailblazer in forging bonds with North Korea, where he was born. Chung visited North Korea a number of times. He met Kim Jong Il three times and set up a number of business deals with Pyongyang. He twice led a convoy of trucks with 500 head of cattle across the DMZ into North Korea. . Chung Ju Yung made an unsuccessful bid for president in 1992. he was found guilty of illegally using $81 million of his own wealth in the campaign. He avoided a jail term because of his age. His son Chung Mong-hun took the rap and did some jail time in his place.
As South Korea democratized in the 1980s and 90s, attitudes towards Chung things changed a lot for Chung South Korean found such distasteful. According to Forbes: Chung was criticised for his vast wealth, estimated to be more than $4bn, and for hypocrisy on family values. It was widely believed that his sons had several different mothers.
Running Hyundai bred Chung's political ambition, although, in the 1992 presidential election, he polled only 16 percent of the vote. Hyundai was punished by the withdrawal of state bank loans, and began to falter. Increasingly, its boss's empire-building and autocracy looked outdated. [Source: Forbes, April 26, 2011]
Even after Korea's financial crisis of 1997-98, Hyundai was reluctant to reform. Power struggles between three of Chung's sons merely hastened the process of breaking up the group. Hyundai Motor is already spun off under a rebellious eldest son, Chung Mong-koo, leaving the third son, and their father's favourite, Mong-hun, with the debt-ridden construction and chip businesses. Only loans from state banks have saved Hyundai from following its rival Daewoo into collapse.
That rescue was a reward for Chung's key role in the peace process with North Korea. He first went north in 1989, but neither regime was ready for compromise. A decade later, he symbolically drove 500 cattle across the demilitarised zone between the two Koreas as a gift, met the northern leader Kim Jong-il, and began tourist cruises to the scenic Diamond mountains (Kumgang-san), which have since taken more than 300,000 southerners to the north. These gestures paved the way for last year's summit.
For this, as much as for founding Hyundai, Chung Ju-yung's place in Korean history is secure, but his country now badly needs to transcend him. He is survived by his wife, seven sons and a daughter.
In retirement, Chung built a huge ranch on reclaimed land. Needing 200,000 tonnes of rock to block the tidal flow, he scuttled an old tanker as the basis for a dyke. Chung died of pneumonia in March, 2001 at the age of 85. Thousand showed u at the funeral. Even North Korea gave him a tribute.
Chung Ju Yung’s Brothers
Chung Ju Yung had five younger brothers: 1) Chung In-yung (1920-2006) founded the Halla Business Group — which included Mando Machinery, Halla Cement, Halla Construction, Halla Heavy Industries, and Halla Climate Control Corp — after leaving the Hyundai Group, he. 2) Chung Soon-Yung (1925-2015) formed the Sungwoo Business Group — which includes Hyundai Cement, Hyundai Welding, Sungwoo Automotive and others after working for Hyundai Engineering & Construction and taking over him Hyundai Cement. 3) Chung Se-yung (1928-2005) was a founder of Hyundai Motor but ultimately left the Hyundai Group with Hyundai Development Co., Ltd., the leading housing builder in Korea. 4) Chung Shin-yung (1931-1962) died in a car accident in Germany while working as a journalist for a Korean newspaper. His only son, Chung Mong-hyuk ran Hyundai Oilbank, the third largest oil refiner in Korea. 5) Chung Sang-yung (1936-) was the founder of the KCC Chemical (Keumkang) group, Korea's leading paint and glass maker. [Source: Wikipedia]
Don Kirk wrote in the New York Times: One of the patriarch's younger brothers, Chung Se Yung, had run Hyundai Motor for 32 years, and hoped to transfer power to his only son. But even though Chung Se Yung, 72, had gained a reputation as the father of the Korean car industry, he was thwarted by his older brother. [Source: Don Kirk, New York Times April 26, 2001]
“So strong are the blood ties that Chung Ju Yung also made certain, many years before, that all four of his younger brothers rose to prominence. He even guaranteed contracts for companies run by the next younger brother, Chung In Yung, 81, who years earlier had opposed the group's efforts to win business in the Middle East. When In Yung's Halla Group was on the brink of collapse in late 1997 and 1998, Hyundai Heavy Industries provided funds for Halla Heavy Industries, and finally took it over.
“The example of Chung Ju Yung's bailout of Halla makes outsiders wonder whether, despite the family feud and the fracturing of the empire, the conglomerate will ever really change. ''Each different bloc will be controlled by family members,'' said Lim Ung Ki, a business professor at Yonsei University in Seoul.
Image Sources: Wikimedia Commons.
Text Sources: South Korean government websites, Korea Tourism Organization, Cultural Heritage Administration, Republic of Korea, UNESCO, Wikipedia, Library of Congress, CIA World Factbook, World Bank, Lonely Planet guides, New York Times, Washington Post, Los Angeles Times, National Geographic, Smithsonian magazine, The New Yorker, “Culture and Customs of Korea” by Donald N. Clark, Chunghee Sarah Soh in “Countries and Their Cultures”, “Columbia Encyclopedia”, Korea Times, Korea Herald, The Hankyoreh, JoongAng Daily, Radio Free Asia, Bloomberg, Reuters, Associated Press, BBC, AFP, The Atlantic, The Guardian, Yomiuri Shimbun and various books and other publications.
Updated in July 2021