Hyunbum Cho Returns to Management... Hanon Systems Normalization and AI Commercialization Put to the Test

Parole Period Ended on September 5... Full-Scale Return to Management Expected
Solid Tire Business Performance... Hanon Systems in Focus

Hyunbum Cho, Chairman of Hankook & Company Group, is set to make a full-scale return to management after overcoming legal risks. Since his parole on July 30, Chairman Cho has attended major meetings and overseen important group matters, but he had refrained from fully resuming official management activities. Now that his parole period ended on September 5, expectations are that business strategies and organizational restructuring, which had been on hold, will accelerate going forward.

According to industry sources on September 8, Chairman Cho is expected to focus on normalizing Hanon Systems, which was incorporated into the group last year, and securing new growth engines after his return to management. In particular, he is reportedly determined to strengthen efforts to translate the group’s group-wide push for artificial intelligence (AI) and data technology into tangible business results.

Hyeonbeom Cho, Chairman of Korea En Company Group. Korea En Company Group

Chairman Cho’s first official move upon returning to management was attending the Group Artificial Intelligence Transformation (AX) Innovation Meeting held on August 20. At this meeting, AX—a concept stressed by Chairman Cho—was a major agenda item. The idea goes beyond simple digital transformation (DX), envisaging the integration of AI into work, production, and the overall organizational culture to drive meaningful gains in competitiveness.

The group’s fundamental strength remains relatively solid. Hankook Tire & Technology posted consolidated sales of 5.6825 trillion won and operating profit of 559.1 billion won in the second quarter of this year. Operating profit increased by 58.1% compared to the same period last year, with the operating margin improving to 9.8%.

The tire division led the performance with sales of 2.8073 trillion won and operating profit of 483.2 billion won, achieving an operating margin of 17.2%. Factors contributing to this performance included improvement in the product mix through increased sales of high-inch and electric vehicle tires, as well as favorable foreign exchange effects. Its financial structure has also improved, with the debt ratio dropping from 101.1% a year ago to 84.7%.

Hankook & Company also reported operating profit of 100.2 billion won in the second quarter, a 35.6% increase compared to the same period last year. However, the results fell short of market expectations. This was due to a decline in orders for the Energy Solution (ES) division, which delayed sales, as a result of U.S. tariffs.

Over 2 Trillion Won Invested in Hanon Systems: Now for Results

The biggest test for Chairman Cho is Hanon Systems. Hankook Tire has been investing in Hanon Systems since 2015. Last year, it injected about 600 billion won in a third-party paid-in capital increase, and in January this year, it acquired an 18.09% stake held by Hahn & Company for 1.2159 trillion won, raising its stake to 54.77% and becoming the largest shareholder. The total investment made to secure control of Hanon Systems exceeds 2 trillion won.

However, after the acquisition, the company’s valuation did not meet expectations, resulting in impairment losses. Hankook Tire recognized an impairment loss of 228.7 billion won on intangible assets related to the acquisition of Hanon Systems in consolidated financial statements, and also reflected an impairment loss of 90.3 billion won for investment in shares on separate financial statements.

As a result, Hanon Systems has become a core task that must prove the results of this large-scale investment, beyond merely being incorporated as an affiliate.

The performance is showing improvement. Hanon Systems recorded sales of 2.8752 trillion won and operating profit of 103.7 billion won in the second quarter of this year. Operating profit increased by 61.2% from the same period last year. For the first half of the year, it posted sales of 5.6235 trillion won and operating profit of 200.9 billion won, with operating profit more than doubling from 85.4 billion won in the same period last year. Net profit also turned around, from a net loss of 37.7 billion won in the first half of last year to a net profit of 154.7 billion won this year.

The financial structure is also improving. By the end of June, the debt ratio stood at 157.2%, down from 168.1% at the end of last year. With the company pursuing cost reduction and operational efficiency, targeting sales of 11 trillion won and an operating margin of 5% for the year, the challenge for Chairman Cho after his return is to solidify current improvements in performance and cash flow into a structural recovery in profitability.

Thermal Management, AI, and Data... Seeking New Growth Drivers

Another task for Chairman Cho is to expand Hanon Systems' business portfolio. This is because the importance of technologies for managing the heat of batteries and electronic components is increasing, given the coexistence of diverse powertrains such as electric vehicles, hybrids, PHEVs, and EREVs.

Based on its automotive thermal management technology, Hanon Systems is reviewing new businesses, including AI data center liquid cooling and ESS thermal management. The growth trend in electrification is also continuing. In the second quarter of this year, the proportion of sales related to electrified vehicles reached 31%, up 2 percentage points from the same period last year.

The aftermarket is also being fostered as a new growth engine. After participating in AAPEX, North America's largest automotive aftermarket exhibition, last year, Hanon Systems established a dedicated global aftermarket organization this January. Recently, it launched a page dedicated to the aftermarket on its official website and has been working to expand its global distributor and dealer network.

Chairman Cho’s recent bid to acquire Lotte Rental is also seen as an extension of his future mobility strategy. It is understood that, alongside the stable cash-generating abilities of the car rental business, he focused on the potential to leverage the data accumulated during vehicle operations for autonomous driving R&D. However, in the bidding process, Hanon Systems lost out to Texas Pacific Group (TPG), a US-based global private equity fund, due to its financial firepower.

AI is also a core growth driver for the group. Hankook & Company Group has worked with KAIST since 2019 to apply AI to tire research and development and production. Major initiatives include searching for new material combinations, designing tire patterns, and automating product inspections using AI.

An industry insider commented, "Major challenges such as the integration of Hanon Systems, AI-driven innovation, and expansion into the future mobility business are piled up. How quickly the group puts its growth strategy into action following Chairman Cho’s return will be the key factor deciding future corporate value."

This content was produced with the assistance of AI translation services.