Hyundai may post lower profit in first quarter of 2013

Article by Anita Panait, on April 26, 2013

Hyundai’s profit in the first quarter of 2013 may likely shrink, no thanks to production stoppages in South Korea and the won strength against the yen. A lower-than-expected result would place more pressure on Hyundai to produce more cars outside its home base of South Korea. Hyundai is expected to release on April 25, 2013, its first quarter results, which may reflect an 18-percent dive in net profits to KRW2 trillion ($1.79 billion), according to Thomson Reuters I/B/E/S.

Such drop would mark the second straight quarterly profit decline by Hyundai, which may have suffered from possible costs related to recalls of over 1 million vehicles globally. While Hyundai has managed to outsell competitors like Toyota Motor Corp and General Motors Co during the global economic downturn with its low-cost cars, the carmaker is now badly hit by the rising South Korean won combined with the weakening Japanese yen, as well as labor issues in South Korea.

Hyundai's South Korean labor union staged a series of production stoppages during weekends in March and April, resulting in lost production worth $850 million. South Korea accounts for around 40 percent of Hyundai’s total production. Production issues at home may prompt Hyundai to expand its capacity in the United States and China, according to analysts.

Suh Sung-moon, an auto analyst at Korea Investment & Securities, remarked that labor problems in South Korea “make it inevitable for Hyundai/Kia” to increase overseas production. He noted that even without labor issues, Hyundai's portion of overseas production is lower than its Japanese rivals. Hyundai, when combined with affiliate Kia Motors Corp., is the fifth-largest carmaker in the world.

Topics: hyundai, profit

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