Hyundai Motor Group, chosen Thursday as the buyer of the land that the state energy agency put up for sale, laid out an ambitious plan to use the expensive property to build a global business center and an automobile theme park emulating auto giant Volkswagen.
The world's fifth-largest automotive conglomerate submitted the winning bid of 10.55 trillion won (US$10.12 billion) for the 79,345-square-meter site in posh southern Seoul that currently houses the Seoul headquarters of the state-run Korea Electric Power Corp.
To complete the purchase, Hyundai has to complete payment within a year in three installments.
The first point of order is to bring most of its affiliates under a single roof.
At present, Hyundai Motor has 30 affiliates in Seoul with 18,000 employees, but its main office building in Yangjae, also in southern Seoul, can only house five companies and 5,000 workers.
The headquarters building is near the southern tip of Seoul and generally has poor public infrastructure support.
Hyundai executives have long complained that with affiliates scattered across the capital city, the conglomerate lacks speed in decision-making. There is also the issue of affiliates paying high rental fees.
"The purchase plan marks the next leap forward for the motor group," the company said in a news release, adding that the project will improve the value of the auto industry, and contribute to the national economy.
The business group also plans to build its own version of Volkwagen's Autostadt, which has played a part in enhancing the brand equity of the Germany carmaker. The Autostadt in Wolfsburg, Germany, is a major tourist attraction and has been used by Volkwagen to show off its achievements as a world-class carmaker.
There will be a skyscraper office tower by 2020, plus a hotel, convention center and a department store, all fitting into the wider blueprint announced by the Seoul metropolitan government to transform the site, adjacent to the Convention and Exhibition Center (COEX) complex, into a new hub for the country's meetings, incentives, conferences and exhibitions (MICE) industry.
The company predicted the global center would be able to attract upward of 100,000 people annually from around the world, generating 1.3 trillion won in earnings each year.
It said the three companies taking part in the consortium for the development -- Hyundai Motor, Kia Motors and Hyundai Mobis -- have the cash needed for the venture.
As of late last year, Hyundai Motor and Kia had 17.6 trillion won and 5.7 trillion won in cash and easily convertible liquid assets, respectively, while Hyundai Mobis reported 6.1 trillion won in cash reserves.
Insiders hinted that other affiliates will also partly foot the bill in exchange for office space. There is even talk of creating a consortium to generate extra cash.
Development of the land, including getting permits, could cost at least 5 to 6 trillion won more, with some estimates going as high as 10 trillion won.
On the future use of its current headquarters building, Hyundai said it is considering various options that may include converting it to a control tower for the conglomerate's extensive research and development efforts.
When Hyundai tried to build a 110-story headquarters in 2006, it considered using the present Yangjae office space as its R&D headquarters.
In regards to concerns that Hyundai may have paid too much for the real estate, an executive stressed that the final price was decided in consideration of future value.
"Judging by future value and overall potential, the price is not too steep," he said.
Despite such arguments, critics said the amount it has to pay is equivalent to the six years of research and development (R&D). Last year, the two carmakers spent 1.85 trillion won on R&D.
"With the two carmakers entering a period of launching new car models at a rapid pace to retain and expand market control, the tying up of so much money on land raises alarm bells, especially since others in the industry are pouring money and manpower into the building of more eco-friendly low emission cars," one industry watcher said. (Yonhap)
