SEOUL (Reuters) -- Hyundai Motor Co. today posted a 15 percent year-on-year fall in quarterly net profit, broadly in line with market forecasts, as it was hamstrung by weekend production stoppages and unfavorable currency moves.
Net profit fell to 2.1 trillion won ($1.88 billion), Hyundai said.
The automaker's second quarterly profit drop in a row puts the automaker under more pressure to expand capacity in the United States and elsewhere to cushion the impact of a weaker Japanese yen versus the South Korean won which lessens its price competitiveness.
Expanding capacity abroad would also lessen the impact of labor troubles at home.
Group Chairman Chung Mong-koo, whose father founded the Hyundai conglomerate, has slowed capacity expansion in recent years, attempting to avoid repeating Toyota's recall crisis in 2009/10 which was partly a result of its aggressive production growth.
That cautious strategy could backfire in the recovering U.S. market by slowing its sales growth and allowing rivals to bite into its market share, analysts have said.
A media report said on Wednesday Hyundai affiliate Kia Motors may build a new plant in the United States by 2014 but the automaker denied the report.
Fraught relations with workers in South Korea emphasize the need to diversify production base, analysts say. Hyundai Motor's labor union again refused to work last weekend, the seventh consecutive weekend stoppage, resulting in production losses of 48,000 vehicles worth nearly 1 trillion Korean won. The union and company have for months locked horns over weekend wages and a new shift system.
Currency woes
Hyundai's earnings have also been eroded by the won's 4.5 percent rise during the first quarter. This has reduced the value of its repatriated foreign earnings, while the weaker yen has aided Hyundai's Japanese rivals.
"Expectations have been already lowered for Hyundai's earnings because of currencies and weekend production disruption. But today's results met expectations, which helped relieve earnings concerns," said Kim Sung-soo, a fund manager at LS Asset Management.
Hyundai's vehicle sales in the U.S. rose less than 1 percent in the first quarter as deliveries of the Sonata mid-size sedan fell 14 percent, offsetting the 34 percent jump in sales of the Santa Fe sport utility vehicle, according to the company.
In Europe, where industry demand is at a 20-year low, Hyundai's sales fell 11 percent as deliveries of its Tucson SUV and i10 compact slumped.
Hyundai vehicle sales in China increased 41 percent to a record last quarter, selling 260,716 units. Beijing Hyundai Motor, the Korean company's Chinese venture, is targeting to boost sales to 1.4 million units by 2015. That's more than 60 percent higher than its deliveries last year.
Bloomberg contributed to this report
