Profit at Hyundai Motors Plunges to New Record Low
Quarterly net profit at Hyundai Motors tumbled to a new low of over four years due to an extended strike at home as well as weakness in its emerging markets. The automaker warned it might miss sales targets for the second consecutive year.
Falling short of estimates, the quarterly results arrive only a day after the automaker based in South Korea said close to 1,000 of its executives would take a pay cut of 10% amidst a dramatic slump that reflects the slower growth in its more developed markets.
The automaker replaced its heads of both its operations in China and South Korea during October after losses in market share in both of its key markets.
Its problems have exacerbated problems for South Korea where the economy has been hit from Samsung Electronics’ recall crisis of its latest smartphone and the Hanjin Shipping collapse.
Net profit at the automaker dropped by 10% to end the quarter at 1.05 trillion won equal to $935 million. The results were the 11th straight quarter profit had fallen. It was well below a forecast of analysts of 1.3 trillion won.
Earnings were down even though last year’s third quarter was weak, due to China sales being less than had been anticipated that year.
The automaker said its shipment around the world fell 3% to just over 1.085 million autos from the same three-month period last year. It was squeezed by low demand in South Korea after tax breaks expired for new car purchases in June.
Uncertainty that is surrounding the car industry is expected to remain for the short term due to a slowdown in markets that are advanced and a drop in emerging countries, said the automaker in its prepared statement.
The domestic factories of the automaker were hit due to sporadic strikes between July and September in what was called by the company its worst labor dispute ever.
Management and leaders from the union reached a new deal earlier in October to resolve issues, but not prior to Hyundai losing output of close to 140,000 vehicles with a worth of 3 trillion won in possible sales.
Shares of Hyundai were lower by 0.4% after the announcement of its earnings following a drop in the broader market of more than 1.1%.