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Hyundai-Led Group Agrees to $10 Billion Land Deal, Stokes Union Rage

September 28, 2014
3 min to read


Hyundai Motor Co and its two affiliates approved Asia's biggest property deal since the financial crisis on Friday when their board members agreed to pay 10.55 trillion won ($10.12 billion) for a trophy plot of land to house a new headquarters in downtown Seoul, reported Reuters.


The Hyundai-led group - which includes Kia Motors Corp and Hyundai Mobis Co - agreed to the price, more than triple the appraised amount, prompting a sharp sell-off in the companies' shares.

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About 11.6 trillion Korean won ($11.11 billion) have been wiped of the market values of the companies since the purchase was announced last week.


Labor union employees, who make up the bulk of the companies' workforce, voted on Friday to extend a strike into next week in show of disapproval of the purchase which will be used to house a new headquarters, hotel and theme park complex.


"Building an integrated control tower will enhance work efficiency and brand value," Hyundai Motor said in its regulatory filing on Friday.


The Hyundai-led consortium, which beat Samsung Electronics to buy the plot in the capital's high-end Gangnam district, plans to ink the deal with the state-run Korea Electric Power Corp (KEPCO) later on Friday.


Shares of Hyundai Motor ended down 1.3 percent at 187,000 won each on Friday, their lowest level in 17 months. Kia Motors slipped 0.8 percent, and Hyundai Mobis was up 0.6 percent.

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The $10 billion price-tag is equivalent to selling nearly half a million of Hyundai's flagship Sonata sedans, and nearly two years of combined wages for Hyundai's 63,099 employees in Korea, according to Reuters' calculation.


Hyundai Motor will pay 55 percent of the price, followed by Hyundai Mobis Co Ltd with 25 percent and Kia Motors Corp with 20 percent, the companies said. They did not disclose whether the board approval was unanimous.


The boards of the three companies had approved bidding at the Sept. 18 auction without knowing the price, which was deemed confidential, four board members told Reuters earlier.


Board disapproval is rare at Korea's family-owned conglomerates, or chaebols.


WORKERS EXTEND STRIKE

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The land deal led to the domestic unions of Hyundai Motor and Kia Motors resuming partial strikes this week, clouding the outlook for annual wage talks.


Workers "are angered by the astronomical amount of money" to be spent on the land, Kia's union said.


Hyundai Motor's labor union said on Friday it would stage a partial strike from Monday through Thursday next week.


Hyundai, the world's fifth-biggest automaker along with its affiliate Kia, has been hit by strikes in all but four years of the union's 27-year history, although they usually make up losses with extra work later that year.


The stoppages comes as Hyundai and Kia are planning to build new factories in China and Mexico, closer to export markets and where wages are lower than in South Korea.

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Recurring labor disputes, high wages at home and strong currency are expected to put further pressure on the automaker to accelerate overseas production. Hyundai made 62 percent of its cars last year overseas, up from 20 percent in 2004.


Since annual wage talks began in early June, Hyundai Motor and union negotiators have wrangled over a new wage calculation, which the company says would sharply increase labor costs.


Hyundai's domestic employees, excluding executives, earn an average 94 million won ($90,419) per year.

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