bitkahuna

iTrader: (20)

ok EZZ, i'm honestly trying to understand your debate with Motorola here.

here's what i don't understand about your points. any publicly traded company doesn't own 100% of its own stock, by definition. and any company that buys a publicly traded company, still doesn't (usually) end up owning 100% of the stock. acquiring company A usually converts all stock of acquired company B to shares of A on some valuation formula, but that still means A doesn't end up owning all the stock of B.

now if HMG isn't publicly traded, yes, it seems rather unusual since it owns stock in HMC and KM but even if it 'only' owns 33% of the stock of KM, isn't that kind of irrelevant, because it presumably doesn't own 100% of stock of HMC either - HMG is a holding company in essence. maybe a bit like Alphabet, and now Meta are holding companies for their respective sub-companies (Google, Waymo, Instagram, WhatsApp, Occulus, etc).

if my analogies are wrong, please clarify for me. thanks.

Motorola

EZZ's entire argument rests on the idea that HMG totally owns HMC and therefore only controls Kia via HMC, when as seen above this couldn't be further from the truth or actual corporate structure of HMG.

Except HMG doesn't own any stock- the subdivisions themselves all comprise HMG under one single leadership structure. Essentially, HMG is the corporate equivalent of a Portuguese man o' war.

EZZ

Its different than Alphabet as Google and Waymo are just subs that are wholly owned by Alphabet. Alphabet is the public company that reports the financials and if they decide to break out Goog and Waymo, that is the decision by the parent. Hyundai and Kia are the public companies here and they have a complicated holding structure with HMG but HMG doesn't do the reporting. Hyundai Motor Corp and Kia actually report separately and are separate public companies. Given this, my point was that their auto sales should be reported separately and the current structure doesn't allow them to report together. If HMG were to try and report them together at the same detail as the current financial statements, they would have to restructure and purchase the outstanding stock to consolidate the financial statements and begin publicly reporting the financials and auto sales of the two companies combined. Obviously HMG doesn't report at all and the two companies are operated separately with two different mgmt structures and different investor basis. You can't just combine the two companies even if HMG wanted to do that because legally, each company has to remain transparent to its investor base. If I bought Kia stock, I wouldn't let HMG slam the two companies together and report as one company...i want complete transparency into what I bought.

HMG might be managing the two companies at a higher level than Kia and Hyundai's C level but that defeats the purpose of having a public facing company with two management teams competing with one another. Given their current public ownership structure, the two companies need to be reported separately and treated as such.

patgilm

This is literally what I do for a living and I can’t even follow anything you guys are saying because the only way you can figure this out is to know the complete structure of said companies in question. The organizational structures of companies are so complex there are no absolutes unless you know the entire structure and I’m too lazy to look it up.

bitkahuna

iTrader: (20)

wish i could like your post.

definitely unusual, although maybe it's not unusual in s. korea or other places.

but hey, it seems to be working.

Motorola

Counting Hyundai and Kia separately is missing the whole point of how they're structured. Every subdivision of HMG has its own public stock. Hyundai Mobis, Hyundai Glovis, Hyundai Steel, Hyundai E&C, Hyundai Motor Co, Kia, etc. Every one of these subdivisions is crucial to the development and manufacturing and distribution of Hyundai Motor Group's vehicles- which will then be assembled and sold by Hyundai Motor Co. and Kia. HMC and Kia alone can't develop cars by themselves and trying to yank them off the HMG line of command would be the equivalent of amputating a limb.

Therefore listing Hyundai and Kia sales as separate solely because of their public stock doesn't take into account the fact that Hyundai and Kia and all the other subsidiaries I previously listed follow a single chain of command under the Hyundai Motor Group and each company alone can't do anything without the rest of the subdivisions supporting them. So if something like Hyundai Mobis (their parts and service arm) got screwed, you can bet that also translates to Hyundai and Kia.

EZZ

That still doesn't mean that the holding company is directing operations and acting as a single entity. Kia and Hyundai have separate management teams that make decisions in the best interests of their own respective companies. They have different investor bases that may not like what Hyundai is doing but like Kia and vice versa. They may share components, technology, and resources but they make different operational decisions based on whats best for that company. Currently, they have to report separately by law and the holding company can't even legally slam the two entities together right now and report as one entity. Given the operational autonomy of the mgmt teams, it doesn't make sense to look at Hyundai and Kia as one company because they don't act in that fashion.

Motorola

Yes it is. Same Chairman even. Hyundai Motor Co. and Kia are both at the mercy of HMG head management, because they are merely limbs for HMG's other subdivisions. Whatever decisions they make is for the sake of strengthening Hyundai Motor Group. They aren't free to act on their own just because their stocks are independent.

By your logic, you are also claiming that Hyundai Globis, Mobis, Steel, Engineering etc. are also acting as single entities because they each have their own public stocks despite their entire business models revolving around Hyundai and Kia's cars.

Whatever the case, your claim that Hyundai Motor Group owns and can only control 33% of Kia is simply bunk. Kia is not an independent entity, and HMG is not a shareholder.

EZZ

Hyundai only owns 33%. This is simply fact that can be looked up anywhere. I never claimed HMG controls 33%...i said they don't own all of Kia which is true and this in turn forces both Kia and Hyundai to report separately. Kia is an independent company with a different mgmt team than Hyundai and they do whats in the best interest of Kia as their shareholders would demand...similar to any other public company.

Motorola

Uhhh...


If Kia is independent than who procures their raw materials? Who designs and develops their components? Who assembles their factories? Who ships their cars? Cause those operations are not done by Kia. They are performed by the other subdivisions of the Hyundai Motor Group, each with their own stock, and each existing only to serve Hyundai and Kia's cars. And yet they are also publicly traded.

Kia's stock would plummet the moment the other subdivisions of HMG face trouble, because that in turn directly interferes with their intended operations and the stockholders don't want that. Therefore Kia's self interest and HMG are one and the same.

EZZ

Read what i wrote before...i always said Hyundai owned 33%. I never mentioned control which is different. Also, it makes sense for Kia to have a relationship with the other business entities if those are the suppliers to Kia. Are you saying that if one of Hyundai's raw material vendors can't get raw materials, Kia can't source another supplier? Same as if the Hyundai tier 1 vendor can't develop a certain component, they can't source from another supplier? Kia's relationship with its vendors are similar to Toyota and its tier 1 suppliers and vendors. If they can't get the service or components, they are free to source from other vendors similar to any other business. You are implying that they have to use Hyundai components and are precluded to do business with other entities. Where is your proof of that? Are you saying that if Hyundai makes bad design decisions, that Kia's stock also takes a dive...ridiculous. They are independent companies that value based on their independent sales...just like any other public company.

Motorola

It really isn't in the context you've given. The fact that you claim Hyundai Motor Group owns any shares of their subdivisions is enough to demonstrate how blatantly you misunderstand the corporate structure.

Oh yeah, because getting your supply chain that has been established for almost two decades snipped, when you rely on them for almost every component in your car and they rely on you as their primary customer, is something that can be replaced overnight.

Go sit inside a Kia- then tell me who else their platforms, transmissions, engines, infotainment systems, etc are shared with? You think they'll just waltz over to BMW and ask for an engine? lol And forget people like Albert Biermann who are responsible for the tuning of Hyundai, Kia, and Genesis vehicles lol- they're ALL independent.

What "bad decisions" have Hyundai made independent of Kia? Theta II Engines- affected both Hyundai and Kia. Spreading rumors of Apple EV and losing the contract- affected both Hyundai and Kia. The two companies are so intertwined that literally almost every decision they make that financially impairs one impairs the other. And everything they do that hurts their bottom line also hurts the Hyundai Motor Group.

EZZ

What are you talking about. Hyundai Motor Corp owns 33% of Kia. I don't understand how that is a misunderstanding. Hyundai Motor Group is just a holding company and doesn't directly own shares in Kia but controls Hyundai Motor Corp. Kia's situation with its Hyundai vendors is similar to any other manufacturers and their vendors. I'm not implying they can change their supply chain overnight but they can decide to have other suppliers like any other auto manufacturer. They aren't beholden just to Hyundai vendors if they choose to use someone else. The cars don't share 100% of the same parts from the same vendors...there are differences and their cars are branded differently to target different customers. Therefore, separate mgmt teams, with separate investor bases, with separate sales channels, with separate products, with separate P&Ls should be reported separately.

Motorola

Hyundai Motor Group doesn't own Kia shares anymore than they do Hyundai Motor Corp. shares, or any shares for that matter. That's why they aren't a holding company, but a singular corporate structure consisting of numerous subdivisions dependent on one another. Go back to my example with the chart mentioning Hyundai Mobis that you conveniently ignored to see how using stocks to gauge control/ownership makes zero sense within this corporate structure.

Do you think that Hyundai and Kia's platforms, engines, transmissions, etc are designed solely by Hyundai or some other subdivision for Kia? Nope. They're developed by the Hyundai Motor Group. Not by Hyundai Motor Co, not by Kia, but the entire corporation and all the subdivisions. So no, the relationship isn't merely swapping parts with another company like a ZF transmission- Kia is integrated with HMG in designing every component in their car. The components are designed for Kia and Hyundai, not with Kia as some afterthought.

EZZ

Its obvious that HMG controls HMC without ownership but HMC and Kia are acting as independent companies too. The original question was whether we should lump in Hyundai and Kia together in terms of sales and I still maintain they should always be reported separately and are still legally obligated to do so. I'm not disputing the current supplier/customer integration of the Hyundai companies with Kia but that situation is similar to the vendor customer relationships at Toyota and its suppliers. The companies may be intertwined but the success of Kia doesn't necessarily mean the success of Hyundai and vice versa....and the related stock value. If Genesis fails and posts enough losses, Hyundai stock will suffer but why would that hurt the Kia stock and brand? In fact go look at the 1yr stock price performance of Hyundai vs. Kia and Kia has outperformed the Hyundai stock noticeably (47% vs. 10%) and you say they are completely the same? Its simply not true judging from a simple look at the stocks.

As long as both companies remain public, there will be a some level of autonomy at both companies and their relative financial performance validates that assumption.