HDC Hyeonsan stumbles in successive safety accidents

HDC Hyundai Development Company (Hyunsan) is faltering due to a series of major safety accidents. The stock price plummeted immediately after the accident, and according to the investigation results such as finding out the cause, it is expected that legal responsibility for negligence in safety management or huge expenses will be incurred in the process of rectification. The aftermath of the accident could even extend to HDC Group, which has grown to the top 28 in the business world using the domestic housing business as a foothold.

On the 12th, the stock price of Hyeonsan closed at 25,850 won, down 19.03% from the previous day’s closing price (25,750 won). The stock price recorded the lowest in over a year as concerns grew over the I-Park collapse in Hwajeong-dong, Gwangju, which occurred the day before.

The accident occurred seven months after the collapse of a building in Haksan-dong, Gwangju last year, in which nine people died, raising concerns about the lack of safety in Hyeonsan. The accident occurred on the eve of the enforcement of the Serious Disaster Punishment Act on the 27th. President Moon Jae-in personally urged “to thoroughly investigate the root cause” of the accident, and the prosecutors set up a joint investigation headquarters and the Ministry of Land, Infrastructure and Transport set up an accident investigation committee. Minister of Land, Infrastructure and Transport Noh Hyung-wook foretold, “If any violations are found, we will punish them on the principle of zero tolerance.”

As the government announces its policy of severe punishment, depending on the conclusion of the investigation committee, the target of punishment may be extended to site managers and company management, such as insufficient safety management responsibility. From the perspective of Hyeonsan, the aftermath of the company’s representative apartment brand, ‘i-Park’, is unavoidable, such as a loss of image and a loss of trust. The collapse of the building in Haksan-dong last year also occurred in the process of being demolished to construct an I-Park. This accident is even more fatal in that it occurred at the new I-Park, which is about to move in in November. An official from a large construction company said, “It is extremely rare that the exterior walls are torn off at once in an apartment building that has undergone such a process.”

The aftermath of the accident may also extend to other workplaces in Hyeonsan. Based on last year’s construction capacity evaluation, Hyeonsan is the ninth largest construction company in the country in the contract ranking. As of September of last year, Hyeonsan’s total order backlog in the construction sector amounted to 145 cases, or 21.82 trillion won, posted on the electronic disclosure system of the Financial Supervisory Service. Among them, a considerable amount of housing maintenance projects such as redevelopment and reconstruction are included. The Unam Complex 3 Reconstruction and Maintenance Association, one of the largest reconstruction complexes in Gwangju, is known to cancel the contract with Hyundai Development Company.

HDC Group Chairman Chung Mong-gyu (far right) visits the site of Seongmunan GC in Oak Valley, Wonju, Gangwon-do on the 6th and is talking with the representatives of the group companies.  Provided by HDC Group

HDC Group Chairman Chung Mong-gyu (far right) visits the site of Seongmunan GC in Oak Valley, Wonju, Gangwon-do on the 6th and is talking with the representatives of the group companies. Provided by HDC Group

In the case of ‘Gwangju Hwajeong I-Park’, where the accident occurred, the apartment was sold out in 2019. At the time of sale, the competition was on average 67.58 to 1, and it was so popular that it was all sold out in the first-order subscription. If the move-in scheduled for November is postponed due to an accident, the problem of compensation for damage to the adoptees may arise, and a lawsuit may be filed to cancel the sale of the sale because of the accident. In online cafes where pollinators are active, posts saying “I am anxious” are lined up. There is a possibility that the cost to be borne by the prefecture, such as the cost of rectifying the situation and the cost of damages and compensation for various damages, will increase like a snowball.

The successive major safety accidents in Hyeonsan are expected to adversely affect the group as well. HDC Group’s main businesses include construction (prefectural production), petrochemicals, real estate, and leisure, and the domestic housing business accounts for more than half of the group, so it is substantially dependent on construction. In the case of HDC Group, as the acquisition of Asiana Airlines failed last year, it is already suffering from bad news, such as filing a lawsuit to claim the refund of the down payment.

HDC Group said, “This year, we are focusing on securing future competitiveness as a comprehensive financial real estate group this year,” said HDC Group, at the first future strategy meeting held this year with Chairman Mong-gyu Chung attended. We will focus the group’s capabilities on the business and expand our portfolio to include energy and logistics businesses.”


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