Lee Min-hyung joined The Korea Times in 2014 and has worked as a journalist mainly in Korea’s finance, tech and automotive industry. He specializes in content creation, breaking news and in-depth analysis currently on transportation and mobility. You can reach him via mhlee@koreatimes.co.kr.
KG Mobility CEO steps down amid embezzlement allegation
Jeong Yong-won, KG Mobility's CEO at the time, answers questions from reporters on the sidelines of Seoul Mobility Show in Goyang, Gyeonggi Province, April 4, 2023. Yonhap
By Lee Min-hyung
KG Mobility is facing a leadership vacuum after its former CEO Jeong Yong-won stepped down due to alleged corporate capital embezzlement and because the company is grappling with a decline in sales, analysts and company officials said Friday.
The overnight decision by the automaker’s co-leader is feared to have dealt a blow to the company at a crucial time when the company was looking to achieve stable growth after achieving its first-ever surplus last year.
The leadership crisis adds even more of a burden on KG Group Chairman Kwak Jae-sun, who has served as co-leader of the automaker after the group took over SsangYong Motor Company, the formerly cash-strapped automobile manufacturer in 2022.
The recently rebranded automaker has since displayed signs of rapidly normalizing its financial soundness by revamping its overall growth strategy and focusing on a few strategic models, such as the Torres EVX.
But this scandal is tainting its brand image once again, sparking concerns over whether the automaker will be able to proceed with its pending tasks ahead in a timely manner.
According to data from the automaker, KG Mobility suffered a domestic sales fall of 44.8 percent in February from the previous year, hit hard by prolonged inflationary pressure and high interest rates. Sluggish demand for electric vehicles (EV) also comes as a lingering concern for most automakers, including KG.
KG Mobility’s stock price fell by around 20 percent at one time on Tuesday when police launched a search-and-seizure on the firm’s headquarters.
Analysts said any embezzlement scandal, by top executives, affects a firm’s stock price, and this may result in a possible trading suspension.
“An embezzlement scandal of a certain firm’s executives does affect its stock prices, and financial authorities decide to suspend its stock trading if the embezzlement scale is big enough to pose a financial threat to its normal management,” Hwang Sei-woon, a research fellow at the Korea Capital Market Institute, said.
A KG Mobility spokesperson said Jeong will keep carrying out his tasks, as he will not immediately leave the firm due to the embezzlement allegation.
“He expressed his intention of resigning from the top executive position, but will work on his tasks,” an official from the automaker said.
Jeong and a group of the firm’s executives face police investigation for allegedly embezzling hundreds of millions of won between 2016 and 2018 while signing service contracts with securities firms.
KG Mobility issued official statements, saying that the scandal has little to do with the firm’s current financial circumstances, as the issue took place before KG acquired SsangYong Motor.
“KG Mobility is now a clean company after completing the corporate rehabilitation processes [while acquiring the formerly SsangYong Motor],” the company said.