[Photo by Hyundai Rotem Co.]

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Hyundai Motor Group Wednesday denied it was pursuing to sell money-losing rolling stock, mainstay business of Hyundai Rotem Co., responding to media reports about potential sale to Germany’s Siemens.

The parent and Hyundai Rotem separately issued disclosure to deny sale plan.

Hyundai Rotem shares that rose to 21,400 won ($19.14) in the earlier session lost 4.9 percent, closing Wednesday at 20,350 won.

Local media reported that Hyundai Motor, owning a 33.77 percent stake of Hyundai Rotem, was reviewing spinning off the locomotive business and selling it to Siemens. The sale led by Credit Suisse was reported to be arranging a contract by May.

Hyundai Rotem was capitalized at 2.1 trillion won from Tuesday’s stock closing, putting Hyundai Motor’s entire stake plus management right at a value of around 1 trillion won.

Railway system is Hyundai Rotem’s mainstay business responsible for more than half of the company’s revenue. With little rail infrastructure spending, the business has been on downhill. It has been in the red for the past three consecutive years, recording operating loss of 11.6 billion won in 2020, 259.5 billion won in 2019, and 41.7 billion won in 2018. New orders thinned to 1.2 trillion won last year from previous year’s 1.7 trillion won.

Sale of Hyundai Rotem could have faced various hurdles including Korea’s national defense business operation law. A foreign entity is restricted from owning shares in a company engaged in a defense business in Korea. To become a major shareholder, a foreign firm must pass various regulatory reviews and get the final approval from the trade ministry.

Hyundai Rotem also received massive public funding when obtaining the high-speed train technology from French train giant Alstom. Also, the company is the dominant supplier of high-speed trains to state-run Korea Railway Corp.

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