Hyundai Motor Group is moving to transfer the 400 billion won ($289 million) defense business of affiliate Hyundai Wia to fellow affiliate Hyundai Rotem within this year, accelerating a sale process that would consolidate the group's defense operations.
The plan would unify the group's defense arm under Hyundai Rotem to strengthen its competitiveness, while Hyundai Wia channels the proceeds into new businesses such as robotics and thermal management.
Hyundai Wia has begun formal negotiations, sending an official letter seeking union cooperation to move its Special Business Division to Hyundai Rotem by the end of the year. The division is a high-margin unit that holds a virtual monopoly on core artillery production, including the gun barrel for the K9 self-propelled howitzer made by Hanwha Aerospace and the main gun for Hyundai Rotem's K2 tank.
According to reporting by The Seoul Economic Daily, Hyundai Wia's management recently conveyed the sale plan to the union for the first time during wage and collective bargaining talks and opened negotiations. The company had maintained that "nothing had been discussed" despite repeated union requests to confirm the sale, before formalizing the plan during this year's talks.
"Once the sale of Hyundai Wia's Special Business Division is completed within this year, the group's defense business will be reorganized around Hyundai Rotem," a Hyundai Motor Group official said. "Hyundai Wia will concentrate its capabilities on future businesses such as thermal management systems, factory automation and robotics." Hyundai Wia plans to use the funds secured through the sale of the division for new business investment, following the sale of its machine tool business last year.
If Hyundai Rotem acquires the division, it will bring core artillery technology in-house and build vertical integration spanning its entire weapons systems lineup. Once the acquisition is complete, the company expects to sharply improve cost savings and production efficiency, as well as gain delivery flexibility that would boost its export competitiveness.
Hyundai Wia's naval weapons systems, including its artificial intelligence-based remote controlled weapon station (RCWS) and the close-in weapon system (CIWS-II) for ships, are also expected to help Hyundai Rotem expand its weapons systems portfolio.
The Special Business Division accounts for about 8% of Hyundai Wia's revenue, or roughly 400 billion won a year.
Analysts see Hyundai Rotem's push to expand its defense business as an effort to bulk up into a comprehensive defense company to match Hanwha Aerospace. At its shareholders' meeting in March, the company unveiled a plan to invest 1.8 trillion won ($1.3 billion) in future businesses through 2028. It also plans to actively pursue the expansion of its aerospace center and the development of a methane-engine space launch vehicle.
The reaction of Hyundai Wia's union, however, is a variable. The union opposes the move, calling it a unilateral sale for a group-level business reorganization rather than a decision made at the level of Hyundai Wia itself.
"The push to sell the Special Business Division is being pursued unilaterally as a group-level business reorganization, not as Hyundai Wia's own independent decision," a union official said. "If the union's position is not accepted, we will oppose the sale to the end and take collective action."
