BUSINESS

Hyundai Motor suffers biggest-ever drop in quarterly profit

By Cho Chung-un
  • Published : Oct 25, 2018 - 14:26
  • Updated : Oct 26, 2018 - 17:14

Hyundai Motor, Korea’s largest carmaker, has suffered the biggest-ever drop in quarterly earnings since adopting its current standards in 2010, with operating profit diving 76 percent on-year, the company said Thursday.


The carmaker sold a total of 1.12 million vehicles around the world between July and September, posting 24.4 trillion won ($21.4 billion) of revenue and 288.9 billion won in operating profits, according to the statement.

The company faced a significant drop in profit due to slowing global demand, the strong Korean won and the fact that currencies in major emerging markets such as Brazil and Russia lost 10-20 percent of their value, it added.

The cost of promoting worldwide safety campaigns and marketing expenses for the World Cup in the summer also attributed to the decline in profitability, it added.

By region, Hyundai’s sales in Europe and emerging markets grew, but it suffered a setback in China and North America, with overseas sales falling 0.4 percent to 949,785 units. At home, the carmaker sold 171,443 units, a 1.4 percent decrease due to the shortened work hours system implemented in the third quarter.

The Hyundai earning shock jittered investors Thursday afternoon, with its share price plummeting 10.68 percent to 104,500 won as of 2:20 p.m.

The report came amid growing concerns over a Korean car industry that has been struggling with high labor costs, lower demand and fierce market competition.

Some industry observers say the number of automobiles manufactured in South Korea could drop under 4 million this year, backtracking to the level of 10 years ago.

According to the Korean Automobiles Manufacturers Association, car companies have produced 2.89 million units here so far this year, an 8.4 percent drop. Considering the pace of production volume, the annual production will reach around 3.76 million by simple calculations, they added.

For 11 years from 2004, South Korea remained the fifth-largest car manufacturing country in the world. Its rank fell to sixth in 2016 and 2017, and is likely to further fall to seventh this year, experts said.

Kim Ki-chan, a business management professor at Catholic University in Seoul, said carmakers here have long been tied up in labor-management issues and deepening conflicts with the labor have deprived them from the time and money to focus on research and development.

“The nation’s automobile industry had enjoyed its peak time when Japanese companies were struggling with recall issues and that is when they had to focus on R&D,” he said at a seminar held in Seoul. “But now, what they have are experts on labor issues.”

The struggles of carmakers have already shifted to their parts makers in the country, leaving them strapped for cash.

On Wednesday, a group of parts makers asked the Korean government for emergency aid of 3.1 trillion won, saying they are on the brink of bankruptcy. The size of state aid was calculated after conducting a survey of 851 parts makers across the country, they added.

Amid growing fears of parts makers facing a cascade of bankruptcy, Hyundai Motor Vice Chairman Chung Eui-sun met with representatives, encouraging them to join hands and tackle the situation.

Hyundai and its sister company Kia Motors will make efforts in releasing various new vehicles and entering new markets overseas to help them sustain their business, he was quoted as saying by officials.

Meanwhile, uncertainty in the global automobiles market is expected to continue, Hyundai said, citing the rise of protectionism and budget constraints in advanced economies.

Despite the earning shock, the company said it would see an increase in profit from the fourth quarter, citing new sports utility vehicles lineups, new Genesis models and the adoption of a third-generation platform. 

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



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