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Automobile industry

Moody's Downplays Impact of Hyundai Chairman's Investigation on Company's Credit Ratings

Strategic Insights

— 1 min read

Moody's Investors Service Inc. has stated that an investigation into Hyundai Motor Chairman Chung Mong-koo on bribery charges is unlikely to affect the credit ratings of the country's top carmaker and its affiliate Kia Motors Corp. The investigation, which sought an arrest warrant for Chung and his son, Chung Eui-sun, over allegations of creating a huge slush fund for bribery purposes, is not expected to have a significant impact on the company's market share in South Korea, which accounts for 70% of the domestic car market. Furthermore, Moody's believes that the arrest of Chung will not affect the company's overseas market, as consumers in overseas markets such as the United States and Europe buy cars based on price and quality, not brand recognition.

Key Takeaways:

  • Moody's has affirmed a "Baa3" long-term credit rating for Hyundai Motor and Kia Motors Corp. with a "stable" outlook on their ratings.
  • The investigation into Hyundai Chairman Chung Mong-koo is unlikely to affect the credit ratings of the company and its affiliate Kia Motors Corp.
  • The arrest of Chung, if it takes place, is expected to have little impact on the two automakers' market shares.
  • Hyundai Motor and Kia Motors Corp. are the flagship companies of Hyundai Motor Group.
  • The prosecutors' action may hamper the company's long-term business projects, such as construction of new production units overseas, according to Moody's.
  • Moody's will keep an eye on the company's future decision-making procedures in its management and business activities to maintain its competitiveness in the global market.
  • Standard & Poor's also downplayed the impact of the investigation on Hyundai Motor's credit rating.

Statistics:

  • Hyundai Motor and Kia Motors Corp. account for 70% of the domestic car market in South Korea.
  • The companies are the flagship companies of the Hyundai Motor Group.
  • Moody's has a "stable" outlook on the credit ratings of Hyundai Motor and Kia Motors Corp.
  • The credit ratings of Hyundai Motor and Kia Motors Corp. are currently rated "Baa3" by Moody's.

Sources:

  • "Moody's: Hyundai Chairman's Arrest May Not Affect Credit Ratings" by Yonhap
  • "Hyundai Motor postpones Q1 earnings report amid chairman's arrest bid" by Asia Pulse

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