Hyundai Mobis to spin off parts, module units amid revamp talk

South Korea’s largest auto parts maker Hyundai Mobis Co. is poised to spin off two of its major units that make car parts and modules into separate entities as part of its corporate restructuring.

The Hyundai Motor Group affiliate recently finalized the spinoff plan and held a briefing with executives, people familiar with the matter said on Friday.

The company will launch the two separate entities – one that makes modules by assembling parts for finished vehicles and another that produces airbags, brakes and steering systems – as early as November after forming a task force by the end of this month, they said.

The surviving company will retain the “cash cow” after-sales service division, research and development unit, and automotive chipmaking business, according to the sources.

After the spinoff, Hyundai Mobis will have five subsidiaries, including battery pack maker HL Greenpower, lamp maker Hyundai IHL and car inspection equipment maker GIT.

Hyundai Mobis, which supplies auto parts to affiliates Hyundai Motor Co. and Kia Corp. as well as other global carmakers, is seeking the spinoff to promote business efficiency and boost profitability, industry officials said.

The module and core parts units to be spun off posted combined sales revenue of 33.24 trillion won ($24.5 billion) last year, accounting for 79.7% of the parent’s total sales.

However, the two units combined eked out just 155.1 billion won in operating profit in 2021, posting a 0.5% profit margin. 

By contrast, the after-sales service unit had an operating profit margin of 20% last year.

PRECURSOR TO GROUP OWNERSHIP REVAMP?

Industry watchers said the spinoff plan could be a precursor to the automotive group’s ownership revamp.

Speculation over an impending ownership overhaul resurfaced when Chairman Chung Euisun took over the helm of the group from his father Chung Mong-koo in October 2020.

In 2018, the junior Chung, the group's then-executive vice chairman, sought to carve out Mobis’ module and after-sales parts divisions and combine them with Hyundai Glovis Co. Under the proposed plan, Mobis’ remaining entity was meant to serve as the holding company of Hyundai Motor, Kia and Glovis.

But he had to abandon the plan in the face of opposition from institutional investors, including US activist investor Elliot Management. They opposed the spinoff plan over concerns about a dilution of shareholder value.

Analysts said the chairman is likely to place Hyundai Mobis at the center of the automotive group’s ownership overhaul.

Chairman Chung, who holds less than 1% of Hyundai Mobis, needs to increase his stake in the auto parts maker to strengthen his control over the group.

The junior Chung is widely expected to revisit the aborted attempt to reform the group’s ownership structure to tighten his grip on the conglomerate.

Earlier this year, Hyundai Mobis said it will spend up to 8 trillion won over the next three years on its future growth drivers such as auto chips, robotics and urban air mobility – an integral part of Chairman Chung’s long-term vision for a future mobility operator.

Write to Han-Shin Park at phs@hankyung.com
In-Soo Nam edited this article.