Ex-Opel CEO Faces Elliott Board Nominee in Hyundai Showdown

(Bloomberg) -- Hyundai Mobis Co.’s nominee to its board said the auto group needs to save cash for future investment and not use it to sate short-term interests of investors, an indication of how the Korean conglomerate intends to fight back in its proxy war with Paul Singer’s Elliott Management Corp.

The comments by Karl-Thomas Neumann, a former chief executive officer of automaker Opel, came in response to Elliott’s calls last week for Hyundai Motor Co. and the carmaker’s biggest shareholder Mobis to return more than $6 billion to shareholders in dividends. The New York-based hedge fund also sought to install several board directors, turning its demands into formal resolutions to be voted on at a meeting on March 22.

Ex-Opel CEO Faces Elliott Board Nominee in Hyundai Showdown

“We are in an industry that needs a lot of future investment,” Neumann said in a phone interview Friday. While shareholder activism can result in better governance, short-term goals could end up being destructive, said Neumann, who’s been pitted by Mobis against Elliott’s nominees. Neumann and other nominees, if elected, would be the first non-Koreans on the firm’s board.

Hyundai Motor Group says it’s conserving cash to survive intense competition in the global auto industry, where rivals from Volkswagen AG to General Motors Co. are plowing in billions of dollars to develop electric, driverless and flying cars as newer technologies upend transportation. Activist shareholders such as Elliott say the companies don’t need such a big pile to face the challenge.

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Mobis had a net cash balance of 7.4 trillion won ($6.5 billion) at the end of 2018, exceeding its peers’ average balances by 4 trillion won to 6 trillion won, according to Elliott. The hedge fund’s plan would distribute more than half of Mobis’s excess cash and the dividend would be equivalent to 12 percent of its stock price, it said.

“I believe there’s change required both in corporate governance as well as in capital efficiency and capital allocation,” Randy MacEwen, one of Elliott’s nominees for independent director at Hyundai Motor, said in a video on an Elliott website. "As you look at capital spend and capital allocation, it’s important to have a high return on invested capital."

Besides Neumann, Hyundai Mobis has also proposed Brian Jones, a finance and accounting professional to the board. On its part, Elliott has nominated Robert Kruse, chief technology officer of U.S.-based Karma Automotive, and Rudolph von Meister, an executive who has worked at parts maker ZF Friedrichshafen AG.

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