The rather smooth road along which Hyundai has been travelling in recent years just got bumpy:
  • Yesterday, reports emerged of some rather shonky decision-making in the Hyundai boardroom, whereby a major land transaction was approved by the board, even though it did not know the ($10B!) price tag. The market reacted by stripped $8B off the value of the company's shares. Strike one.
  • Today, it was the workers turn. Over three-quarters of the workforce walked off the job, in protest. The union had been negotiating employment terms and conditions, and had been stonewalled by "cost issues". It now turns out the cost issues may have been related to the land transaction. Strike two.

Claims (that the land purchase will enhance brand value) and counter-claims (that the Chairman wields outsized influence) are circulating. Whereas the company has performed well in recent times, things may not have been as rosy on the inside as they seemed to be from the outside. Clearly, Hyundai has struck a nasty section of potholed road. The board and shareholders face some difficult decisions:
  • Will the directors admit their rather large mistake and at least offer their resignations?
  • Will the management team, who successfully pulled the wool over the board's eyes, now respect the authority of the board?
  • Will the shareholders step in and shake-up the board?

One hopes the shareholders, board and management might set their egos and inherent response (save face) to one side, to create and implement a plan to repair a now-damaged brand image. This nasty series of potholes will not be fatal to Hyundai's long-term prospects if the three parties act quick and smartly, and do so together as one. However, if they don't strike three may not be too far away.