Two can play

Two can play

Hyundai Motor has been seeing increasing international demand for its new passenger cars like Genesis, above. Samsung Electronics, which has a dual strength in parts and finished products as a technology industry giant, has been enjoying stronger sales in mobile Internet products like smartphones and tablets. / Korea Times file Samsung-Hyundai gap closing amid reshaping of chaebol hierarchy By Kim Tae-gyu Fierce two-way competition tends to lead to better results for both players involved and that is case with Korea’s two major conglomerates of Samsung and Hyundai. Over the past decade, the former has seemingly prevailed to win the half-century rivalry but the latter recently revved up its engine to substantially cut the gap in bottom lines. Local consultancy FnGuide said Sunday that Hyundai Motor Group’s eight listed companies chalked up a total of 16.98 trillion won in net income last year, up 9.5 percent from a year earlier. In comparison, the net profit of Samsung Group’s 12 listed subsidiaries declined 17.8 percent during the same period to 17.36 trillion won. As a result, the difference in profitability between the two chaebol shrank from 5.63 trillion won in 2010 to merely 384.6 billion won last year, the smallest after Hyundai Motor Group spun-off from the Hyundai empire in 2001. ``The net income of Samsung Electronics plunged 14.9 percent last year and that of Samsung’s other main units like Samsung SDI and Samsung Heavy Industries also headed down,’’ a Seoul analyst said. ``By contrast, almost all Hyundai Motor Group firms saw their performances improve in tandem with the growing market share of Hyundai Motor and Kia Motors on the global scene.’’ The two companies combined to top 6.5 million vehicles in international sales last year to become one of the world’s top five automakers together with such behemoths as Volkswagen, GM and Toyota. The duo are striving to boost the figure to more than 7 million sales this year despite gloomy projections that the global automotive market will contract due to the lingering economic downturn. ``In terms of overall turnover and market capitalization, Samsung still maintains a comfortable cushion against Hyundai Motor. However, Hyundai has clearly caught up to threaten the decade-long Samsung dominance,’’ the analyst said. Long-time rivalry The competition between Samsung and Hyundai to top the podium in the domestic industrial hierarchy dates back decades and initially, Samsung reigned throughout the 1960s and 1970s. Late Samsung founder Lee Byung-chull advanced into segments to meet the necessaties of life including sugar, textiles and wheat flour to flourish during hard times in the aftermath of the Korean War (1950-53). The group faced jitters because of saccharin smuggling midway through 1966 but managed to keep its firm grip on pole position afterwards. Back then, Hyundai was hardly seen on the radar screen. Yet, things changed in favor of Hyundai in the 1970s when the country shifted its focus from light to heavy and chemical industries, where Hyundai was relatively strong. The construction boom in the Middle East helped Hyundai, through leader Hyundai Engineering & Construction (E&C), rake in oil money in the 1970s. Hyundai took over top place in the late 1970s and stayed there for the next two decades. But the conglomerate’s fortunes started waning when its late founder Chung Ju-yung lost the presidential election in 1992, which resulted in checks from the next administration. In the meantime, Samsung cranked up investments in semiconductors in the late 1980s despite large losses in the preceding years and in 1993, its new head Lee Kun-hee came up with the strategy of putting quality first. The third son of late Lee Byung-chull, who died in 1987, made mistakes like ill-fated investment in the automotive business, which the group eventually sold off after experiencing huge financial damage. Yet, rising profits from the semiconductor division and success in other high-tech areas catapulted the Seoul-based corporation to the top spot with the advent of the new millennium. Ups and downs in new millennium With Samsung faring well, Hyundai seemed to suffer a perfect storm with a confluence of several events drastically aggravating the situation. In early 2000, Chung chose his fifth son Mung-hun as his successor to head the Hyundai Group including Hyundai E&C while entrusting only the automotive industry to his second son Mong-koo. His sixth son Mong-joon assumed Hyundai Heavy Industries. The eldest son died in a car accident in 1982. But the father-to-sons power transfer was not peaceful and things got worse after his death in early 2001, the year when Hyundai lost its managerial rights on debt-stricken Hyundai E&C to creditors via a debt-equity swap scheme. Two years after the back-to-back bad news, new group Chairman Mong-hun jumped to his death from his office in downtown Seoul when police were investigating a slush fund involving its North Korean businesses. But Hyundai Motor Group kept its head up and revitalized the animal spirits, said to be ingrained in the corporate DNA of Hyundai. In 2001, Hyundai and Kia combined to roll out 2.46 million cars but the figure jumped to more than 6.5 million last year. Its ranking among local conglomerates also soared from fifth place in the early 2000s to second in the mid- and late-2000s to trail just run-away leader Samsung. In line with the fast upsurge of the automotive group, it now poses a serious threat to the seemingly invincible prowess of Samsung. Hyundai Motor Group acquired Hyundai E&C last year, the mother firm of the Hyundai empire, to claim the authority as a genuine successor of the late Chung although shipping-oriented Hyundai Group argues that it is the bona fide heir. Currently, Hyundai Group is headed by Chairwoman Hyun Jung-eun, the widow of the late Mong-hun.