The Myth of 'Apgujeong Hyundai Apartment' by Hyunsan, Facing the Worst Crisis

Chairman Chung Mong-gyu Apologizes but Another Accident Occurs
Performance Decline Adds to Uncertainty This Year

[Image source=Yonhap News]

HDC Hyundai Development Company, which had built the ‘Apgujeong Hyundai’ legend, is facing its worst crisis that could shake the very existence of the group due to another apartment collapse accident that occurred again in Gwangju. Despite Chairman Chung Mong-gyu, the head of the group, personally visiting the accident site seven months ago to apologize and emphasize prevention of recurrence, a major disaster has occurred again, making it difficult to avoid heavy responsibility. The ambitious future strategy of HDC Group, which set the vision of a ‘comprehensive financial real estate group’ and the goal of becoming the ‘strongest developer’ this year, is facing difficulties even before it begins.

According to the industry on the 12th, HDC Hyundai Development Company is in a desperate crisis due to the exterior wall collapse accident that occurred on the 11th at the Hwajeong Hyundai I-Park new construction site in Hwajeong-dong, Seo-gu, Gwangju. This is because a similar accident occurred only seven months after the building exterior wall collapse during demolition work in the Gwangju Hakdong 4 District redevelopment in June last year, which resulted in 17 casualties.

The Gwangju Hakdong collapse accident at that time was clearly a man-made disaster. According to the government’s two-month investigation and announcement of the accident, the causes of the tragedy were identified as construction ignoring the demolition plan and regulations, demolition carried out through subcontracting and sub-subcontracting to shorten construction periods and reduce construction costs. Chairman Chung bowed his head with a public apology and emphasized, "We will establish company-wide measures to prevent recurrence so that such accidents never happen again."

Afterwards, HDC Hyundai Development Company introduced safety management reinforcement measures such as allowing construction site workers to actively exercise their right to stop work even if there is no immediate danger, and adopting a smart safety and health system that connects accident causes and risk control monitoring into one. In addition, Chairman Chung’s ‘Agile management,’ which was criticized for neglecting safety in favor of efficiency and speed, was addressed through innovative personnel appointments involving 30 executives, including appointing President Yoo Byung-gyu and Executive Director Ha Won-ki as co-CEOs at the end of last year, showing the will to turn the crisis into an opportunity. However, as a result of this recent accident, the chairman’s bowed apology and safety measures have faced criticism as mere ‘show performances.’ Especially if it is revealed that this was another predictable ‘man-made disaster,’ it seems unlikely that Chairman Chung will be able to avoid responsibility.

HDC Hyundai Development Company’s performance last year plummeted amid various controversies such as the ‘Gwangju Hakdong collapse disaster’ and the ‘Suwon I-Park City fraudulent sales.’ As of the third quarter of last year, cumulative sales decreased by 14.8% compared to the same period the previous year, and operating profit shrank by 30.6%. This was due to the housing sales volume, a major foundation, falling short of targets and one-time losses such as provisions for defect lawsuits.

The performance outlook for this year is also uncertain. Newly appointed CEO Yoo, who has taken on the task of restoring both performance and corporate image, has set strengthening the developer business and safety as core management goals, but setbacks have become inevitable from the start. HDC Hyundai Development Company plans to supply about 23,000 households nationwide this year. However, the market’s cold response is, "It is hard to trust the company after causing such accidents twice in a row," and there are even sharp criticisms saying, "They should withdraw from the housing business." CEO Yoo stated in an official statement on the day, "We deeply regret and take full responsibility for this unacceptable accident," and added, "We will devote all company resources to accident recovery and damage restoration."

HDC Hyundai Development Company traces its origins to Korea Urban Development and Halla Construction, with the former being the predecessor of Hyundai Construction’s housing business division. Since the mid-1970s, it has completed construction of the Apgujeong Hyundai Apartments, a symbol of ‘apartments’ in South Korea and the beginning of the Gangnam era. This was the first private urban development project in Korea along with Yeouido and became the starting point for the popularization of private apartments. Subsequently, it became a trend to attach the construction company’s name to the complex name.