Hyundai Mobis headquarters in Seoul / Yonhap

By Park Jae-hyuk

Hyundai Mobis, an auto parts subsidiary of Hyundai Motor Group, is said to be pushing ahead with spinning off modules and components manufacturing units, raising speculation that the restructuring is intended for the automotive group's governance reforms.

According to industry officials, Monday, Hyundai Mobis informed its executives last Thursday of its plan to focus more on aftersales service and R&D, by spinning off its manufacturing units by November. The company will reportedly notify its employees of the plan later this week and transfer some of them to the newly established subsidiaries.

In 2018, Hyundai Motor Group sought to split Hyundai Mobis into two units ― one in charge of investments and key components manufacturing and the other in charge of aftersales service and modules manufacturing ― to merge the latter with Hyundai Glovis, the group's logistics arm.

At that time, Hyundai Motor Group Executive Chair Chung Euisun sought to end the group's circular ownership structures, while tightening his control over the group by swapping his large stake in Hyundai Glovis with shares in Hyundai Mobis, the group's de facto holding firm that owns a 21.4 percent stake in Hyundai Motor. He currently only holds a 2.6 percent stake in Hyundai Motor and a 0.3 percent stake in Hyundai Mobis.

The previous reform plan, however, ended in failure at that time, after facing strong opposition from Hyundai Mobis shareholders, including Elliott Management, a U.S. hedge fund manager.

Against this backdrop, domestic securities analysts expect the resumed efforts for the reorganization of Hyundai Mobis to lead ultimately to governance reform within the group, despite the company's denial of such intentions. Some analysts expect the downsizing of Hyundai Mobis to make it easier for Chung to increase his stake in the company.

"In order to tighten control over Hyundai Motor Group, he should secure a stake in Hyundai Mobis," Hi Investment & Securities analyst Lee Sang-heon said in a report. "Considering the previous failure, Hyundai Motor Group's governance reform scenarios could be diversified."

In contrast, some market observers said that Chung may not use Hyundai Mobis to tighten his control over the group, given that he told reporters in April that there is no right answer for governance reform. In addition, there remains a possibility of the group retracting the reorganization of Hyundai Mobis once again, because of potential protests from its employees and shareholders.