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Hyundai Motor profit falls for 4th straight quarter, hurt by strong won, strikes

Hyundai Motor profit falls for 4th straight quarter, hurt by strong won, strikes

Hyundai Motor Co. said Thursday its fourth-quarter profit slumped 22 percent, hit by a strong South Korean currency, labor unrest and share price weakness at affiliate Kia Motors Corp.
The world's sixth-largest automaker earned 537.2 billion won (US$574 million; euro443 million) in the three months ended Dec. 31 compared with the same period the year before, its fourth straight quarterly decline.
The earnings report capped a tough year for Hyundai.
Chairman Chung Mong-koo was arrested in April and temporarily jailed on embezzlement and breach of trust charges related to a slush fund scandal. Hyundai also suffered its worst year of losses from annual labor strife.
"Mostly, the high won eroded our profitability," Hyundai spokesman Jake Jang said of the fourth quarter, adding that expensive prices for raw materials like steel and equity losses from its 38.7 percent stake in Kia also played a role.
Sales during the quarter fell 6.6 percent to 7.584 trillion won (US$8.1 billion; euro6.2 billion), the second straight quarterly decline.
For all of 2006, net profit fell 35 percent to 1.53 trillion won (US$1.63 billion; euro1.26 billion). Sales dropped 0.2 percent to 27.3 trillion won (US$29.2 billion; euro22.5 billion).
Shares in Hyundai, which released earnings before the stock market closed, fell 0.8 percent to finish the session at 66,500 won (US$71; euro55).
Hyundai and other South Korean exporters had to deal with an increase of 8.8 percent in the South Korean won against the U.S. dollar in 2006.
A stronger currency can make their products more expensive in overseas markets and reduce the value of profits earned abroad when converted into won.
Hyundai, however, has also had to deal with another problem __ the won's strength against the currency of neighboring Japan, a key rival in the global automobile market.
"The dollar has fallen by 24 percent against the won since 2002 but by 7.3 percent against the yen, which made (South) Korean cars more expensive than Japanese cars in overseas markets," said David Park, general manager of Hyundai Motor's Financial Management Group.
Hyundai sells 60 percent of its vehicles overseas.
Japanese automakers like Toyota Motor Corp. "are challenging Hyundai in terms of price," said Kim Hag-ju, an analyst at Samsung Securities in Seoul. "Toyota is saving material costs by reducing the number of components."
Labor problems _ Hyundai's union has walked off the job every year but one since it was established in 1987 _ continued to dog the company in the fourth quarter.
Hyundai suffered partial strikes and slowdowns when union members laid down tools in solidarity with other South Korean workers over issues such as opposition to a proposed free trade agreement between their country and the United States.
The Ulsan, South Korea-based company said that a total of 11 days of strikes in the quarter cost it 15,414 vehicles in lost production worth about 226.3 billion won (US$242 million; euro186 million) in sales.
Last year was Hyundai's worst ever for strikes. Four walkouts cost it 118,293 vehicles in lost production worth 1.64 trillion won (US$1.75 billion; euro1.35 billion), the company said earlier this year.
Spokesman Jang said that Hyundai incurred equity losses amounting to 274 billion won (US$293 million; euro226 million) in 2006 from its stake in Kia due to a 50 percent drop in the smaller company's stock price. In 2005 Hyundai had derived a profit of 389 billion won, he said.
The company will be bracing for potentially more bad news early next month.
The verdict in Chung's trial is due Feb. 5. Prosecutors have sought a six-year prison sentence.


Updated : 2021-06-13 16:22 GMT+08:00