Halla Group this week said it would give no further support for its faltering construction arm, to enhance the credibility and value of the company.

“We understand the investors’ concerns surrounding the paid-in capital increase for Halla Engineering and Construction last month, and will now on work together to gain the market’s trust and recover governance,” said group chairman Chung Mong-won to executives and board members of Mando, a central affiliate of Halla that manufactures car parts. 

On that note, Chung said there would absolutely be no additional support for Halla Engineering and Construction from other Halla affiliates.

In an executive meeting Monday, Chung urged for the group’s embattled construction unit to post an operating profit this year to aim for a net operating profit in 2014, based on the group’s financial support.

“A fast recovery is the only means for repaying the Mando investors, who have lost their faith during the capital increase,” the chairman said.

Last month, Halla Group decided on a controversial paid-in capital increase of 343.5 billion won for Halla Engineering and Construction via Mando.

The move drew much criticism from investors, particularly those with interests in Mando ― a company on a sturdy path of growth based on a strong customer base and high product quality ― who accused Halla of risking the corporate value of the company to save the floundering construction arm.

On April 15, Mando stock prices fell to a record-low following the announcement, forcing Halla Group to buy back stocks to keep prices from further tumbling.

Earlier this month, Mando sought to keep investors informed about its future plans, predicting that it would move back into the black this year due to reduced costs. Next year, up to 320 billion won worth of corporate bonds will mature, but Mando was confident it would raise enough liquidity this year to meet the amount.

By Kim Ji-hyun  (jemmie@heraldcorp.com)