Hyundai Motor Group Chairman Chung Mong-koo got what he wanted: a spacious corporate home in Korea's most prestigious neighborhood.
Now he is paying the price.
With a record $10 billion offer, triple the appraised value of the property, Hyundai outbid rival conglomerate Samsung Group this month for a 20-acre plot in Seoul's swanky Gangnam district, which it plans to use for a headquarters uniting the group's far-flung offices.
The purchase provoked a swift backlash.
Investors sold off Hyundai stocks after news of the deal surfaced on Sept. 18, erasing $8 billion of shareholder value in a matter of days. Labor leaders called strikes at Hyundai and Kia assembly plants, and postponed contract talks in protest. Board members rushed to distance themselves from the decision, saying they weren't told the bid would be so large.
While the deal appears to have become a boondoggle for Chung, 76, who has steered Hyundai Motor Group to new heights since taking over the company in 1999, experts see the purchase as unsurprising, given Korea's status-driven business culture.
The deal will send an unmistakable message about Hyundai's place in the corporate pecking order, aiding in marketing and recruiting, said Don South-erton, a consultant on U.S.-Korea business relations whose clients include Hyundai.
"The dollars shock people, but it's really nothing out of the ordinary over there," Southerton said. "There's a feeling [in Korea] that if you want to be a global player, you'd better be in Gangnam, because that's where the serious global companies are."