Hyundai restyles chairman's image

Hyundai Motor's marketing team is busy preparing for the launch of a new luxury car, the Genesis, which the South Korean automaker hopes will propel it into the same league as Lexus, BMW and Mercedes.

It is not the only new start Hyundai is hoping for this year. A different sort of marketing effort is also under way as the company tries to make over the image of Chung Mong-koo, the chairman convicted of embezzling company money and breach of trust.

Management responsibilities have been decentralised and the company is hoping international showcase Expo 2012 will put the spotlight on a remote South Korean town as it awaits a final court ruling, due on July 10.

Mr Chung, the 69-year-old son of Hyundai's founder, has appealed against the conviction but South Korean prosecutors are seeking to double the three-year prison sentence imposed.

South Korea has a long tradition of cancelling the convictions, or at least the sentences, of conglomerate heads for fear of harming the "national economic interest". Most analysts expect Mr Chung to walk out of the court room, even in the more stringent environment created by President Roh Moo-hyun.

But Hyundai, already struggling to cope with the strong South Korean currency and sagging US sales, is hoping Mr Chung will be allowed to make a fresh start.

"I am really sorry for causing trouble and concerns to the public with this case," an uncharacteristically penitent chairman told the court this month. "I am trying hard to make management more transparent . . . Please allow me the last opportunity to contribute to the company and the national economy."

Faced with the prospect of losing his ability to run the company, Mr Chung – a micro-manager who decides everything from the size of rear indicator lights to the height of the office Christmas tree – has whittled down the planning office that used to report directly to him.

The office used to have 200 staff in 20 departments, but now 73 people working under three vice-chairmen and six presidents – in areas such as research and development and manufacturing – are running the daily operations.

Hyundai appears to be following the example of Samsung Electronics, where chairman Lee Kun-hee oversees strategic decisions but leaves day-to-day operations to executives. Indeed, some employees in Mr Lee's office say they have never set eyes on the chairman.

"It's a move in the right direction, in the sense that there will be more accountability among senior management," said Rhee Nam-uh, head of equity research at Merrill Lynch in Seoul.

Hyundai is also establishing an ethics committee to watch over company management.

Meanwhile, Mr Chung has won back his passport from the courts and has been travelling the world spearheading South Korea's campaign to be the host of the Expo 2012. Since his conviction he has visited the Czech Republic, Slovakia, Turkey, France and Brazil – with one of Mr Roh's aides at his side – to drum up support for the bid.

But one pledge that the company is have difficulty fulfilling is the Chung family's promise to atone for the chairman's sins with a $1bn donation "to society".

Mr Chung promised to donate $1bn worth of shares in Glovis, the affiliate used for creating the slush funds that were key in his trial, but its shares have since halved in value.

The chairman now says he will donate the money over seven years, building an opera house on the Han River in Seoul – a plan first mooted by Lee Myung-bak, the former mayor who is the front-runner to become the country's next president – as well as 12 concert halls in provincial areas.

"He is always thinking about the isolated people who have never seen cultural things like the opera or musicals," said Oles Gadacz of Hyundai. "That's why he came up with this idea as the best way to pay something back to the nation."

Mr Chung's father was an opera fan, holding New Year dinner parties at which he used to join in with the opera singers, karaoke-style, and Hyundai has a large auditorium in its Seoul headquarters.

But in spite of the efforts to make the company less dependent on Mr Chung, the company still says it needs his leadership, emphasising that Hyundai plans to invest $36bn over the next five years.

"We need chairman Chung," said Jake Jang, another Hyundai official. "He steers the ship and without a captain it will be very difficult to navigate to the places we wish to go."