Hyundai net income falls 11th straight quarter as strikes cut production
Hyundai Motor Co. posted a drop in quarterly profit after labor strikes hurt domestic production and a stronger currency eroded repatriated earnings.
Operating profit declined 29 percent to 1.07 trillion won ($943 million) in the three months ended Sept. 30, the company said Wednesday. That compares with the 1.22 trillion won average of 23 analysts’ estimates compiled by Bloomberg.
Net income fell for an 11th consecutive quarter, also missing analysts’ estimates. It fell 9.6 percent to 1.06 trillion won -- the lowest level in more than four years -- missing the 1.23 trillion won average of 23 analysts’ estimates, while revenue declined 5.7 percent to 22.08 trillion won.
The South Korean automaker in September had its first full-scale strike in 12 years after a series of partial stoppages that started in July, before the union and management reached an agreement on wages this month. The disruption led to a production loss of about 140,000 cars valued at about 3 trillion won, while a stronger Korean won eroded overseas earnings.
“It may not be easy to achieve sales target this year,” Choi Byung-chul, Hyundai’s executive vice president, said on a conference call today, referring to the deteriorating global conditions and impact of the labor strikes at home. “We will put all our efforts to overcome the situation in the fourth quarter.”
The automaker, which had set a goal to sell 5.01 million vehicles this year, has delivered 3.54 million units in the first nine months, according to a regulatory filing. Hyundai expects to boost sales in the current quarter with the introduction of new models in its key markets, including the Verna Yuena sedan in China and Grandeur sedan at home, Vice President Koo Zayong said. The company will also increase exports of Genesis sedans and SUVs, Choi said.
Deliveries in South Korea declined 19 percent. Sales in the U.S., its second-biggest market, fell 12 percent, while deliveries in China, its largest market, climbed 20 percent.
The labor strikes at Hyundai Motor that resulted in production loss are among factors that curbed South Korea’s economic growth in the quarter through September, Bank of Korea said on Tuesday. The nation’s gross domestic product expanded at a slower 2.7 percent pace, compared with the 3.3 percent growth in the previous three-month period.
The automaker’s executives will take a 10 percent cut in wages from this month, given the difficult management situation at home and abroad, Hyundai said on Tuesday. Hyundai also replaced the heads of both its South Korean and China operations this month, after market share losses in both key markets.
The won gained more than 7 percent against the U.S. dollar in the 12 months through September, eroding Hyundai’s competitiveness and lowering the value of repatriated earnings. Demand at home also waned after a tax cut on new car sales expired in June.
Reuters contributed to this report.
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