Hyundai Heavy to invest over $3B in research & development following spin-off

South Korean shipbuilder Hyundai Heavy Industries (HHI) Group will invest $3.1 billion in R&D by 2021.

The announcement came on Monday as the South Korean giant hailed the first day as the four independent companies; Hyundai Heavy Industries; Hyundai Electric & Energy Systems; Hyundai Construction Equipment; and Hyundai Robotics.

The company’s spin-off plan to split into four independent companies was approved by the shareholders in late February. The idea is for each independent company to focus on its respective business. In addition, the demerger of the group is meant to improve HHI’s financial soundness by lowering the debt-to-equity ratio to below 100 percent with the transfer of the existing debt of HHI to separate companies on a pro rata basis.

Along with the investment announcement on Monday, HHI also unveiled its technology and quality-centered management strategy.

Under the plan, the new HHI will invest $1.8 billion in developing eco-friendly and smart ships, enhancing offshore engineering capability, and establishing smart shipyard.

Furthermore, Hyundai Electric & Energy Systems (HEES), Hyundai Construction Equipment (HCE) and Hyundai Robotics (HR) will also make an investment of $640 million, $620 million and $90 million for technological innovation, respectively. In the longer-term, HHI Group plans to spend 6-7% as a percentage of annual sales in R&D.

HHI said it will set up lessons-learned database by accumulating engineering failure cases while HEES, HCE, and HR will further accelerate technology development drives. Moreover, the four companies will appoint chief technology officers in charge of driving product development, drafting technology strategy, and nurturing human resources, and expand numbers of researchers to 10,000 from current 4,000.

HHI Group also introduced new HR management system that, according to the company, simplifies current 5-tier ranking system to 3-tier one. The companies also introduce performance-based pay system marking the departure from current seniority-based one.

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