Hyundai Motor’s Profit Sinks to 7-Year Low, Executives to Take 10% Pay Cut
Hyundai Motor’s profit sank to a seven-year low in the third quarter, falling well below forecasts. The carmaker said a strike weakened demand and slowed production in emerging markets.
Hyundai, the largest automaker in South Korea, said its earnings for the third quarter fell 10% from the previous year to 1.06 trillion won, or $937 million. The company hasn’t posted a profit this low since 2010.
“Analysts were projecting earnings of 1.3 trillion won, so Hyundai really missed the mark last quarter,” said a spokesperson for Opteck, an online trading platform for forex and contracts for difference (CFDs).
Sales for the third quarter slipped 6% to 22.1 trillion won, or $19.5 billion. Operating income came in 30% lower to 1.07 trillion won, or $944 million. Operating income was also at its lowest level in seven years.
photo Gerd Altmann via pixabay
Hyundai blamed the poor results on a strike last quarter, which disrupted operations. Workers staged a walkout for 212 hours during the yearly wage negotiations. The strike disrupted the manufacturing of about 95,000 vehicles.
Sales were stronger in China, but not strong enough to offset weak sales in Russia and Brazil and poor demand in the U.S. and Europe.
Quality issues have plagued Hyundai, which has lost some of its market share in South Korea. Higher demand for SUVs has also hurt the company, which specializes in sedans.
Hyundai has plans to launch its Genesis luxury sedan under an independent brand in hopes of boosting its profit margin and image.
Global shipments were also lower in the third quarter, falling 3% to 1.085 million vehicles.
In a statement, Hyundai said there is uncertainty in the automotive industry, and that uncertainty is expected to persist for the foreseeable future.
To offset the losses, company executives will be taking a 10% pay cut. The salary cut will affect the executives at 51 of the auto group’s companies, according to a spokesperson for Hyundai. The spokesperson said the pay cuts are voluntary and will go into effect this month. No information has been revealed as to how much the pay cut will save the company, or which ranks of executives will be affected.
While experts argue that the pay cut is not significant, it does highlight the difficulties Hyundai is facing.
The executive pay cut is the first for the company since 2009.
Earlier in October, Hyundai replaced the heads of its China and South Korean units due to concerns about 2017’s outlook, Reuters reports.
Author: Jacob Maslow
