Hyundai Motor Group couldn’t help but express displeasure toward a letter from US hedge fund Elliott, saying that its proposal is not helping the company improve its governance structure, and also breaches the nation’s capital market law.

The world’s fifth-largest carmaker said that it has declined Elliott’s offer of establishing a corporate governance committee, stressing that the law strictly bans a company from discussing confidential information with a specific shareholder. 

Elliott’s proposal of merging Mobis’ after-service unit with Hyundai Motor and the remaining Mobis operations with Glovis, would also do little to resolve issues with the group’s inter-affiliate trading, the company said.

The Elliott’s letter, revealed by Bloomberg on Thursday, was sent on Aug. 14.

Some insiders said the US vulture fund might have leaked a business letter “intentionally” and that it is yet another tactic to attack the carmaker and make profits by raising the stock value.

Pointing out Elliott increasing its stake in Hyundai Motor, Bruce Lee, a hedge fund expert and the founder of a Seoul-based Zebra Investment, said that the carmaker may have to respond to Elliott more seriously than before and even have to compromise with the US fund.

Elliott said in the letter that it has increased its stake in Hyundai Motor to 3 percent. In April, it said it owned over $1 billion in combined shares of Hyundai Motor, Kia Motors and the Hyundai Mobis, although this is estimated to equal less than 1 percent of total ownership in the three companies.

“It appears that Hyundai Motor has no feasible solution yet, and is having trouble drafting options that please the owner family at the same time,” he said.

“Things are different now from the time Hyundai came with the first proposal (on March 28). Its sales performance has not been good, making shareholders of Hyundai Motor unhappy, and market trust is certainly lower than before as it has since had a record of withdrawing the plan and canceling a shareholder’s meeting.”

Hyundai Motor abruptly dropped its plan to merge Mobis’ AS unit with Glovis, and said it will come up with a plan B.

Reports have swirled around that the nation’s second-largest conglomerate might announce a new restructuring plan by the end of August. But the group has not come up with the plan yet.

“The company is focusing on expanding the market and improving competitiveness,” Hyundai Motor said in a statement. “The company will communicate with all shareholders step by step, in a transparent manner, as soon as it comes up with the optimal plan in regard to corporate governance restructuring.”

Park Ju-gun, founder of CEOScore, meanwhile, said that Hyundai might have a plan settled, but appears to be waiting to see what happens to a pending bill to revise the fair trade law. The nation’s antitrust agency is planning to revise the nation’s Monopoly Regulation and Fair Trade Act to curb inter-affiliate trading and put a tighter ceiling on cross-shareholding. The revision of the law is subject to parliamentary approval in the National Assembly.

By Cho Chung-un (christory@heraldcorp.com)