TWO YEARS after its spread around the globe, Gangnam Style fever has caught up with Hyundai, and cost it dearly.
The South Korean car maker has paid three times the going rate for an 80,000sq ft plot of land in the trendy Gangnam district of Seoul made famous by Psy, a South Korean musician whose trademark crossed-hands dance was imitated by world leaders including Barack Obama.
The company plans to build a new headquarters, hotel and motor theme park on it but investors say the site is a trophy property and that the $10.14bn (£6bn) it has spent buying it has been wasted.
“The bid price is nonsense,” said Kim Sung-soo, a fund manager at LS Asset Management and an investor in Hyundai companies. “I was stunned.”
Shares in Hyundai Motor and its sister company Kia Motors plunged 9% and 10% respectively after the seller of the land, Korea Electric Power, announced the winning bid.
The Gangnam district of Seoul, South Korea
Hyundai Motor Group has plenty of cash reserves which critics of the deal say it should have spent on new factories and R&D. However, by investing such a large sum on its new HQ and theme park, the company will have avoided additional, large corporate taxes on profits.
A spokesman for Hyundai said that its lavish HQ, hotel, convention centre and theme park were just what a large global company of its size should have.
“In order to bolster brand value that befits a top-five company, we need a global business centre,” he said.
UPDATE: Wednesday, September 24
Hyundai’s generous land payment has reignited tensions over ongoing wage discussions between workers and management, leading to a partial strike involving some 40,000 employees at the car maker’s main plant in Ulsan, and others across South Korea. It follows a two-day strike last month by both Hyundai and Kia workers.
A statement released by the union said: “The management has kept saying they don’t have enough money while opposing the wage reform, but look how much money they have for this property deal!”
According to a Hyundai official, the strikes in August, and the workers’ refusal to work overtime, have cost the company some 32,000 cars in lost production, and $673m (£411m) in sales.