The chief of the Korea Fair Trade Commission said Thursday that a recent demand made by US activist hedge fund Elliott to Hyundai Motor Group to create a holding company by merging Hyundai Motor and its parts making affiliate Hyundai Mobis would be in violation of Korea’s fair trade law.



“Elliott’s call to create a holding firm could violate the law that separates industrial and financial capital,” Kim Sang-jo told reporters before his opening speech at a local business conference.

“I explained the same thing at the foreign media briefing held on Monday,” Kim added.

His remarks are seen as clarifying the stance of the antitrust watchdog on the latest corporate governance issue between Elliott and Hyundai.

On Monday, Elliott sent a letter to Hyundai Motor Group, saying the group should merge Hyundai Motor and Hyundai Mobis and then separate it again into a holding firm and an operating firm.

Under such a scenario, however, Hyundai’s two financial arms, Hyundai Capital and Hyundai Card, will be placed under the holding firm. Under the nation’s law that separates industrial and financial capital, a holding firm cannot own stocks of financial firms.

In March, when Hyundai Motor announced its reshuffle plan of corporate governance, it said it would make Hyundai Mobis a controlling firm, in contrast to market expectations that it would be made a holding firm. By making Hyundai Mobis a controlling firm, it could be free from the controversy of having financial firms.

After the announcement was made, FTC chief Kim said, “It was the right decision making in good time,” adding that “a motor company cannot sell cars properly without a capital firm.”

Elliott has increasingly been making demands toward South Korea’s largest automaker, saying it holds more than$1 billion worth of stocks in the three key units of Hyundai Motor Group.

By Shin Ji-hye (shinjh@heraldcorp.com)