Hyundai and Kia to cut costs amid dropping profits

Article by Christian Andrei, on June 11, 2015

After operating profit and sales declined in the first quarter, Hyundai Motor Co. and Kia Motors Corp. have decided to cut costs, according to a joint email from the two companies. No details were given on where the cuts will be made. No estimates were cited. During the quarter that ended March 31, the operating profit of both Hyundai and Kia fell for the fourth straight quarter.

The automakers said that they haven’t been able to compete with companies like Toyota Motor after their sales were affected by the unfavourable currency-exchange rates. KB Investment & Securities Co. analyst Shin Chung Kwan predicts that the first item to be cut would be related to marketing, advertisement, and sales.

He also thinks that with the present situation, the automakers will have a say during negotiations for other incurred costs like wages and prices of auto parts. A senior executive source told the JoongAng Ilbo newspaper that Hyundai Motor Group aims to cut 30% of costs. Japanese automakers have the advantage in overseas markets amid the strengthening won and a weakening yen.

Hyundai’s sales, both domestic and overseas, fell for a second straight month in May. It also wasn’t able to get on the global SUV boom, brought on partly by the drop in gasoline prices.

None of Hyundai’s SUVs got in the top 10 top-selling models in China (its biggest market) during the first quarter. Last April at the Shanghai auto show, Hyundai displayed the revamped Tucson SUV.

Hyundai is planning to sell 90,000 units of the new Tucson in U.S. in 2016. Sometime in the second half of 2015, Hyundai’s new Creta SUV will be launched in India.

Topics: hyundai, kia, profit

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