Cho Hyun-bum, chair of Hankook & Company Group, who is in custody on charges of embezzlement and breach of trust, received a prison sentence on appeal, making a prolonged leadership vacuum at the group inevitable. Hankook & Company Group had planned to make this year, when its business ranking rose into the top 20 after incorporating Hanon Systems, the first year of growth, but the lack of leadership will make it difficult for the time being to find new growth engines and pursue synergies among affiliates.
The Criminal Division 13 of the Seoul High Court (Presiding Judge Baek Kang-jin) on the 22nd sentenced Chair Cho to two years in prison (one year and six months for embezzlement and six months for breach of trust) on charges under the Act on the Aggravated Punishment of Specific Economic Crimes. It is a reduction from the three-year sentence (two years and six months for embezzlement and six months for breach of trust) handed down in the first trial. However, after preparing for the appeal while in custody since the first-instance ruling in May, Chair Cho again failed to avoid being taken into custody in court.
In business circles, there is an outlook that as Chair Cho's absence is prolonged, management uncertainty at Hankook & Company Group will persist. For now, the search for new growth engines is bound to be put on hold. On May 10, in a message marking the 84th anniversary of the founding, Chair Cho encouraged new businesses, saying, "Let's overcome internal and external crises with proactive innovation and create a new order," but his detention that same month has made such efforts effectively difficult.
This year was a particularly important time for Hankook & Company Group. In January, after finalizing the acquisition of Hanon Systems, the world's No. 2 automotive thermal management solutions company, its domestic business ranking based on assets published by the Fair Trade Commission jumped from 49th last year to 27th this year. Riding this momentum, the group planned to seek synergies between Hankook Tire & Technology and Hanon Systems and bolster growth.
A business community source said, "Unlike in the past, decisions on investments are being made very quickly," and added, "Even if the chair receives reports from prison, given the limits to communication, the pace of investment will clearly slow."
Stabilizing Hanon Systems is also bound to face setbacks. Hanon Systems swung to a loss with 334.4 billion won in losses last year due to the impact of the electric vehicle "chasm" (a temporary demand slump), but it returned to the black in the third quarter with 95.3 billion won in operating profit, succeeding in turning a profit after six quarters. It is at a stage where it must improve financial soundness and bet on business expansion, and it recently even carried out a paid-in capital increase to raise 983.4 billion won. Although a significant portion will go to debt repayment, it also needs to finalize uses for mid- to long-term growth, which is difficult without Chair Cho.
Attention is also on whether Chair Cho will appeal to the Supreme Court, challenging the appellate ruling. Hankook & Company said, "We are bewildered by the unexpected outcome," and noted, "We are carefully reviewing our next steps."