SEOUL (Reuters) - Hyundai Motor 005380.KS said on Friday it will cancel $890 million worth of treasury shares, its first stock cancellation in 14 years - a plan that comes amid shareholder pressure to improve returns, restructure and bounce back from dismal earnings.

The logo of Hyundai Motor is seen at its dealership in Seoul, South Korea, April 26, 2017. REUTERS/Kim Hong-Ji

The cancellation is an initial win for U.S. hedge fund Elliott Management, the most prominent among the few activist shareholders to seek reforms at South Korea’s powerful chaebol or family-run conglomerates. But whether Hyundai will cede to its other demands is less clear.

“While this is a positive development, it falls well short of what shareholders require,” Elliott spokesman Michael O’Looney said.

Hyundai’s move shows the chaebol have become more responsive to calls for reform. They also face government pressure to improve governance as well as public anger over the perception that their growth has not sufficiently benefited smaller firms and ordinary people.

Elliott ramped up pressure on the South Korean automaker on Monday, calling for a holding company structure, the addition of three independent board members as well as a share cancellation.

“Hyundai Motor seems to be trying to reach a compromise with Elliott by accepting part of its demands,” said Kim Jin-woo, an analyst at Korea Investment & Securities.

Ahead of a shareholder vote on a reorganization plan for the wider group next month, Hyundai said it plans to cancel 560 billion won of existing treasury shares on July 27, and will buy back and cancel another 400 billion won worth of stock.

“Hyundai Motor has and will continue to focus on improving shareholder value. Today’s announcement is part of a long consideration process and displays our efforts to honor this commitment,” it said in a statement.

The cancellation came on the heels of Hyundai’s quarterly profit halving to its lowest level in nearly six years, hurt by tepid sales in the United States and China.

The action, however, drew the ire of Hyundai’s labor union which said that at a time of a severe decline in earnings, management was seeking to appease just one shareholder with funds that had been earned by workers.

“The union and 51,000 domestic workers could not be more disappointed by the company’s humiliating action in yielding to Elliott’s demand,” it said.

WATCHDOG CRITICIZES ELLIOTT

Elliott holds shares totaling more than $1 billion in Hyundai Motor, Kia Motors 000270.KS and Hyundai Mobis 012330.KS, which is set to be de facto holding firm of group.

The wider Hyundai group last month unveiled some reform measures aimed at simplifying its complex ownership structure, but Elliott countered they were insufficient to address the discount in Hyundai’s shares compared to overseas automakers.

“The share cancellation plan will help placate Elliott and other investors, and raise the chance of Hyundai’s reorganization plan getting shareholder approval in May,” said Ko Tae-bong, an analyst at Hi Investment & Securities.

The pressure from Elliott has been criticized by South Korea’s anti-trust watchdog which said on Thursday its proposal for the group to adopt a holding company structure was “inappropriate” and, if implemented, would be in violation of antitrust law.

Elliott said in a statement on Friday it expected to have dialogue with the antitrust watchdog over the restructuring plan. It did not comment on the share cancellation.

The U.S. hedge fund scored a partial victory against Samsung Electronics Co Ltd 005930.KS last year, which increased shareholder returns after pressure from Elliott, although its call for a holding company structure was rejected.

In 2015, Elliott narrowly lost a battle to block the merger of two of Samsung Group affiliates. The deal, however, later became the center of a corruption scandal involving Samsung’s chief and leading to jail time for the country’s former president.

Hyundai’s shares ended up 1 percent, giving the automaker a market value of $32 billion. Although its stock slumped nearly 5 percent on earnings on Thursday, it has gained 10 percent so far this month following its restructuring plan.