Years of bitter feuding between Hyundai Elevator, the nation’s leading elevator manufacturer, and Schindler Group, its No. 2 shareholder, resurfaced on Monday after a top Swiss envoy had a rare meeting with Cheong Wa Dae officials requesting the government’s intervention.
According to local reports, Swiss Ambassador to Korea Jorg Al. Reding recently met An Chong-bum, senior presidential secretary on economic affairs, to ask South Korea’s top office to step in.
He claimed that the Swiss firm has suffered tremendous losses due to the Korean lift-maker’s attempt to protect its managerial rights in Hyundai Merchant Marine, the de facto holding company of Hyundai Group. The biggest shareholder of HMM is Hyundai Elevator -- a unit directly led by the group chairwoman Hyun Jeong-eun -- with an 18 percent stake.
Schindler Holding AG chairman Alfred Schindler (Bloomberg) and Hyundai Group chairwoman Hyun Jeong-eun (Yonhap)
In the meeting with President Park Geun-hye’s top aide, the ambassador reportedly said it was not right for Hyundai Elevator to use its assets to protect its management’s interests in HMM. Hyundai’s marine arm has faced a desperate financial crunch in recent years.
If the government does not intervene to settle the matter, foreign investors could lose trust in South Korea, a government official quoted him as saying in the JoongAng Ilbo newspaper. The ambassador has also reportedly made similar requests to the Trade Ministry and the Financial Services Commission.
A Cheong Wa Dae official admitted the report, but said that the office has declined to entertain the Swiss envoy’s plea.
“We have delivered our position that the government cannot intervene in the case involving a private company,” the official said. “The meeting was held to hear from foreign companies about their difficulties in doing business in Korea.”
The discussion of Schindler’s case at the high-level diplomatic channel also raised concerns that the Swiss firm could take further action, as well as the possibility of strained diplomatic relations between the two countries.
A publicist representing Schindler in Korea, however, defied the concerns, saying that the Swiss firm has no plan to take action yet.
“The Swiss ambassador to Korea seems to have made such a demand as part of efforts to protect Swiss firms operating or investing in business in South Korea,” said Yang Wang, a PR representative of Schindler. But it is closely monitoring the progress of a damage suit the company has filed against Hyundai.
Schindler sued Hyundai Elevator for inflicting financial damage by raising capital through another public offering. The capital increase was designed to make up for the losses from derivative contracts to save its affiliate HMM, when the marine arm’s stock price fell.
The Swiss firm is demanding chairwoman Hyun and three other executives to pay 718 billion won in damages to Hyundai Elevator, saying that the derivative contracts had nothing to do with the elevator business but was carried out for their own interests to protect the management rights over HMM.
Hyundai and Schindler had been amicable business partners when the Swiss firm sided with chairwoman Hyun when she was in managerial disputes with KCC over its elevator unit.
In 2006, Schindler Holdings acquired the second-largest stake in Hyundai Elevator from KCC.
The short-lived honeymoon ended in 2010 when the Swiss firm opposed chairwoman Hyun’s attempt to acquire Hyundai Engineering and Construction -- which she eventually lost to her brother-in-law Chung Mong-koo, owner of Hyundai Motor, the nation’s largest carmaker.
Until 2013, Schindler had held a 35 percent stake in the Hyundai affiliate, through capital increases and stock acquisition. But the portion dropped to 17.1 percent after the Hyundai affiliate sought a series of massive paid-in increases, the Swiss firm said.
Hyundai has been countering the claims, saying that the Swiss firm was picking on management to seek a hostile takeover of the company.
Meanwhile, Swiss ambassador refused to comment on his reported meeting with presidential officials, saying he doesn’t speak publicly on individual issues, but only on the framework conditions involving bilateral ties between the two countries.
By Cho Chung-un (email@example.com)