Hyundai slows down

IIPM PUBLICATION

Hyundai Motor Co. is not exactly having the time of its life. For the fifth quarter in the running, the South Korean carmaker’s – and the world’s sixth-largest automaker – net profit as well as sales have taken a beating. Recently, the company announced that for the first quarter of this year (that ended March 31), its net profit fell 10.2% to 307.4 billion won; a year earlier, the figure had stood at 342.39 billion. Sales-wise, Hyundai saw a decline of 2.6% in the last quarter. This is not what analysts expected: They had predicted that the company would post a net profit that would be much, much higher. So what happened along the way? Well, for one, there’s the case of the stronger currency. A stronger currency (in this case, the won) is making Hyundai vehicles much more expensive overseas, therefore reducing the value of profits earned. This is put into context when one sees that, in 2006, exports constituted for almost 60% of Hyundai’s sales. Also, Hyundai has been facing a problem on its labour front, and strikes are a very common feature at the company. Last year, for instance, as many as four striking labour walkouts had cost Hyundai a whopping 1.64 trillion won in lost output. Then, there’s also the intense competition in the Chinese market, which is forcing the auto-makers to reduce prices there. All in all, Hyundai seems to have run into a roadblock.

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Source : IIPM Editorial, 2007

An IIPM and Professor Arindam Chaudhuri (Renowned Management Guru and Economist) Initiative