SEOUL, South Korea – Hyundai Heavy Industries (HHI) will split its non-shipbuilding divisions into independent companies as it looks to improve management efficiency and sharpen its core competitiveness.
Under the plan sanctioned at its recent board of directors meeting, the current Shipbuilding, Offshore & Engineering, and Engine & Machinery Division will form a new Hyundai Heavy Industries.
Existing non-shipbuilding divisions of Electro Electric Systems, Construction Equipment and Robotics, Green Energy Division, and Integrated AS unit will be separate business entities tentatively named as Hyundai Electric & Energy System, Hyundai Construction Machinery, Hyundai Robotics, Hyundai Heavy Industries Green Energy, and Hyundai Global Service, respectively.
An HHI official said in a statement: “So far, we have been placing an emphasis on disposal of non-core assets and businesses as part of management rationalization measures. Now is the time for us to shift our focus to fostering core businesses of to-be-established business entities. And the spin-off is the starting point.”
Amid a dearth of new orders and sluggish global economy, for the past months HHI has been active in selling or liquidating non-performing units including Hyundai Cummins (construction equipment engine), Jake (wind power gear box) and Hyundai Avancis (thin solar panel), and disaffiliation of Hyundai Corp., Hyundai Finance Corp., and Hyundai Venture Investment Corp.
The official added: “Despite the different natures and sectors they operate in, our existing non-shipbuilding divisions have been operated and managed under an umbrella of the Shipbuilding Division. In the process, we have witnessed inefficiency in the management of the company. Due to the structure, divisions with a smaller portion of company-wide sales have not been well positioned to secure independent competitiveness.”
The official continued: “The spin-off is one of the final measures in the KRW-3.5 trillion ($3-trillion) worth management improvement plan we drafted for creditors in May this year. By carrying out the plan preemptively, we aim to regain trust from the market and lay a solid foundation for take-off. What’s noteworthy is the fact that we can also lower the debt-to-equity ratio to below 100% by transferring the existing debt of HHI to separate companies on a pro-rata basis, and thus in turn enhancing our financial soundness.”