Ailing Hyundai firms lose W500 bil. in Mt. Kumgang tourism b

Ailing Hyundai firms lose W500 bil. in Mt. Kumgang tourism business

The ailing Hyundai Group has suffered an investment loss of 500 billion won ($385 million) from its Mt. Kumgang tourism business, an audit report said yesterday, warning that the group's North Korean project is now in danger of collapsing.
The Seoul-based Samil Accounting said that Hyundai Engineering and Construction and other Hyundai companies jointly invested 500 billion won in Hyundai Asan, the North Korean business arm, but the capital has now been totally erased by the mounting losses.

"Hyundai Construction, for instance, has yet to collect its fees from the construction of a port near Mt. Kumgang," said Park Kwang-soo, senior vice president of Samil Accounting, suggesting that the troubled North Korean business is partly to blame for the builder's insolvency.

Samil's audit report then concluded that Hyundai Asan's corporate viability is extremely uncertain due to its worsening liquidity problems. "Excessive tourism fee payments to the North and the falling number of Mt. Kumgang tourists have driven Hyundai Asan into a severe liquidity crunch. As countermeasures, the group is negotiating a 50-percent cut in the tourism fee to North Korea and asking the Seoul government to extend financial support."

But the outlook for cooperation from either North or South Korean governments is not encouraging, it noted. The report went on to warn that without any immediate government-level support, Hyundai's North Korean business will soon grind to a halt.

In relation to this, Seoul's Unification Ministry denied a recent newspaper report that the government has been studying ways to bail out Hyundai Asan's troubled Mt. Kumgang business. The ministry said the government has never considered allowing Hyundai to open casinos aboard its cruise ships bound for the North Korean mountain, in response to a report in a vernacular daily which said that with the inauguration of Unification Minister Lim Dong-won, the government is positively considering permitting casinos and duty-free shops on cruise ships.

The rumors about cruise ship casinos also raised the ire of the opposition party, with the Grand National Party releasing a statement saying: "The possibility that casinos would be allowed to operate on Hyundai-operated ships would trigger resistance from taxpayers, not to mention deep suspicions over collusion between the President Kim Dae-jung government and the Hyundai Group."

Signs of an imminent disaster are already visible. Hyundai Asan defaulted on the March payment of its $6 million monthly Mt. Kumgang tourism fee last week, following a $4 million default in February. A company spokesman said that Hyundai Asan unsuccessfully tried to wire $10 million to the North, due to its capital shortage. Earlier in late March, the group failed to reach an agreement with the North to halve the monthly Mt. Kumgang tourism fee of $12 million.

In addition to Hyundai Construction's bankruptcy crisis, the loss-making North Korean tourism business is expected to continue to weigh heavily on the group's drained finances. Hyundai Asan has managed to keep its North Korean business projects afloat, thanks to financial assistance from Hyundai Merchant Marine and other sister affiliates. However, a group-wide liquidity crisis and restructuring have now made such financial aid impossible.

Meanwhile, Samil also said in a separate report that it had concluded as early as last November that Hyundai Construction was struggling and that it was uncertain whether it could continue as before. At the time, Hyundai Construction announced a package of new restructuring measures, including the establishment of management reform panel and the resignation of Kim Jae-soo as its vice president.

( cmyoo@koreaherald.co.kr)

By Yoo Cheong-mo Staff reporter



2001.04.03