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KOREA: South Korea to Indict Chairman of Hyundai

Reuters
May 16th, 2006

South Korea will indict the chairman of Hyundai Motor Co. today in a cash-for-favors scandal, prosecutors said Monday.

Chung Mong-koo, 68, chairman of the country's top automaker, was arrested in late April after a monthlong investigation of allegations that Hyundai Motor and its affiliates had created slush funds to offer cash for political favors using a lobbyist as a conduit.

Analysts are concerned that the probe could create a leadership vacuum and derail the company's ambition to become the world's fifth-largest automaker by 2010.

Hyundai, together with its affiliate Kia Motors Corp., is the world's seventh-biggest automaker.

Prosecutors plan to indict Chung Eui-sun, the son of the chairman and president of Kia, and other executives of the Hyundai group later, said Kang Chan-woo, a spokesman for the Supreme Prosecutors' Office.

Chung Eui-sun was previously questioned about the case but not detained.

Hyundai executives declined to comment Monday.

Analysts said the scandal would mean little to foreign auto buyers. The United States is a growing market for Hyundai, whose U.S. sales rose 9% to 455,012 vehicles in 2005.

"I think it's going to have a pretty small, if any, effect in the North American market," said Karl Brauer, editor in chief of Edmunds.com, an auto research website. "The scandal is not about the quality of vehicles, so it wouldn't affect most buyers."





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