SEOUL — Hyundai Motor Group Chairman Chung Mong-koo was sentenced to three years in prison yesterday for breach of trust and embezzlement, but industry watchers doubted whether the powerful tycoon will see the inside of a cell.
Seoul District Court sentenced Chung, the head of the world’s sixth-largest automaker and son of the founder of the giant Hyundai Group, to three years for embezzlement and breach of trust involving a $96 million slush fund scandal that came to light last year.
Chung, 68, had “greatly undermined the transparency and soundness of business management and had many adverse effects on business culture,” said Judge Kim Dong-oh.
Chung appeared shocked as he heard the verdict — most pundits had expected a suspended sentence — though he was not immediately taken into custody.
Hyundai Motor, Korea’s second-largest chaebol, or family-run conglomerate, after the Samsung Group, said Chung would appeal, and took pains to point out that he was still at work.
“It is definitely a setback — it was unexpected — and we are greatly disappointed but there is an appeal and we remain hopeful,” said Hyundai spokesman Oles Gadacz. “But he is out on bail and attending to his duties so it is business as usual.”
Chung was detained for two months in April in the same case before being granted bail in June. During his absence, his group appeared rudderless: Groundbreakings at overseas plants were delayed, and the company was beset by strikes. Its union, known locally as “the aristocrats of labor” for its power and influence, is considered Korea’s most militant, and cost the company $1.7 billion last year, while net profits dived by 34 percent.
Hyundai is critical to South Korea’s economy.
Hyundai and Kia together account for more than 70 percent of the country’s vehicle exports. And autos make up about 10 percent of total overseas shipments in South Korea, the world’s 10th-largest economy.
Together, they form the world’s sixth-largest automaker by sales and production with popular models such as Hyundai’s Sonata sedan and Kia’s Sorento midsize sport utility vehicle.
Hyundai Motor’s stock recovered from early sell-offs to close the day unchanged. Market watchers were unfazed.
“This is absolutely not serious,” said a local auto sector analyst who requested anonymity. “First the negative brand impact on Hyundai was last year. Secondly, while all chaebol bosses act like emperors, Chairman Chung will not be able to come to the front of management, and considering his age, Hyundai will be forced to decentralize management.”
Other market watchers agreed.
“I have seen people associated with the company and they think it very unlikely that the chairman will be doing any slammer time, and they must have some basis for that,” said Hank Morris, a director at Seoul consultancy IRC Ltd. “Even though he has been sentenced, it is likely that there will be some mitigations — it is common to take into account age, health and economic importance of the convicted person.”
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