Housing Business in Dire Straits... Chung Mong-gyu's Dream of a 'Mobility Group' Also Shattered

Jung Mong-kyu's 'Mobility DNA' Revealed Throughout 23 Years of Management
Efforts in Business Diversification... Housing Sector Faces Weakened Competitiveness
Core Group Business Faces Market Exit Threat Amid Repeated Accidents

Jung Mong-gyu (center), chairman of HDC Group, who has faced public criticism for a series of major collapse accidents in Gwangju, is greeting before making a public apology and a statement regarding his position on the collapse accident of the outer wall of Hwajeong I-Park in Seo-gu, Gwangju, at the HDC Hyundai Development Company Yongsan office in Seoul on the 17th. Photo by Kang Jin-hyung aymsdream@

Jung Mong-kyu, chairman of HDC Group, stepped down as chairman of HDC Hyundai Development Company on the 17th, dealing a blow to his vision of transforming the group into a ‘comprehensive mobility company.’ Although Chairman Jung had sought to diversify the group beyond its construction-centric business, all plans were derailed as the ‘housing sector’ collapsed due to a series of accidents. However, some critics argue that Jung’s resignation from the chairmanship of HDC Hyundai Development Company, rather than from key affiliates such as the holding company HDC where he serves as a registered director, is merely a formal retreat.

◇‘Mobility DNA’ Unhidden for 23 Years= Chairman Jung received management training at Hyundai Motor Company, established by the late honorary chairman Chung Se-young, known as ‘Pony Chung.’ In 1999, when the late honorary chairman Chung Ju-young of Hyundai Group passed the automobile management rights to Jung Mong-gu, Jung Mong-kyu moved to Hyundai Development Company alongside his father. Industry insiders agree that understanding Jung’s 23-year management history is impossible without considering ‘Pony Chung.’

Jung holds a deep affection for the history of growing Hyundai Motor Company with his father. The ‘mobility DNA’ ingrained at that time continued at Hyundai Development Company. When Asiana Airlines was put up for sale in the M&A market in 2019, Jung made a ‘bold bet.’ He submitted a bid about 1 trillion won higher than competitors in the main bidding and was selected as the final preferred negotiator.

Upon being selected as the preferred negotiator, Jung suddenly held a press conference, appearing publicly for the first time to mention the word ‘mobility.’ An industry insider recalled, "At the time, no one expected HDC Hyundai Development Company to bid such a large amount, and the sudden press conference with Chairman Jung himself appearing and shouting ‘mobility’ was a series of surprises." However, Jung’s aspiration was not realized. Although the main contract was signed and domestic and international corporate merger reviews were filed smoothly, the acquisition was canceled due to the outbreak of COVID-19 and the ensuing prolonged downturn in the industry.

◇New Business Ventures Followed, but Core Business Weakened= Jung’s ‘mobility DNA’ is said to have acted as a negative factor for Hyundai Development Company, the group’s core. Rather than expanding construction, he consistently ventured into other fields, such as acquiring Youngchang Musical Instruments in 2006. He entered the distribution business by directly operating Yongsan I’Park Mall, which was taken on through the Seoul Yongsan private station development project, and in 2015, he also entered the duty-free shop business with Hotel Shilla.

While Jung’s attention was mainly elsewhere, HDC Hyundai Development Company’s competitiveness declined. It was passive in bidding for reconstruction and redevelopment projects, losing the ‘home turf’ of Gangnam to competitors, and the brand value of I’Park also fell. Its ranking in contract orders also plummeted. Once among the ‘Top 5,’ it has since declined. In 2014, its contract ranking dropped to 13th, pushing it out of the top 10 construction companies, and it currently barely holds 9th place in the ‘Top 10.’

An industry insider said, "More people probably know Chairman Jung as the president of the Korea Football Association than as the head of a construction company." Jung was inaugurated as the 52nd president of the Korea Football Association in 2013 and has successfully served three consecutive terms, holding the position for nine years.

Chung Mong-gyu, chairman of HDC Group, who has faced public criticism for a series of major collapse accidents in Gwangju, is seen leaving after delivering a public apology and a statement regarding his position on the collapse accident of the outer wall of Hwajeong I-Park in Seo-gu, Gwangju, at the HDC Hyundai Development Company Yongsan office in Seoul on the 17th. Photo by Kang Jin-hyung aymsdream@

◇Possibility of Transition to Professional Management at Hyundai Development Company… Challenging Road Ahead= Recently, Jung declared his intention to develop HDC Hyundai Development Company into the nation’s top ‘developer (comprehensive real estate developer).’ He has continuously emphasized strengthening developer capabilities to overcome the growth and profitability limits of simple construction.

However, last year’s demolition accident in Gwangju and last month’s exterior wall collapse accident at a newly built apartment dealt a direct blow to the ‘developer’ vision. In the case of the Gwangju accident, under the ‘Framework Act on the Construction Industry’ (hereinafter the Construction Industry Act), business suspension of up to one year is possible. If suspended, all new bids for public and private projects are completely prohibited.

If the recent collapse accident at Gwangju Hwajeong I’Park results in five or more deaths and the investigation reveals ‘significant damage to major parts due to poor construction,’ HDC Hyundai Development Company could face a business suspension of up to one year.

Although Jung was evaluated to have initiated succession work by launching HDC Labs last year, even that has become difficult. Jung’s three sons have been steadily purchasing shares of the HDC Group holding company for the past two years. An industry insider said, "Succession work was expected to proceed centered on HDC Labs, but at this stage, it will be difficult to carry out succession work even behind the scenes."