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Kia Net Income Misses Estimates After Three-Week Strike at Home

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Oct. 25 (Bloomberg) -- Kia Motors Corp., South Korea’s second-largest carmaker, reported profit missed estimates after a three-week strike at home cut production and a stronger won curbed the company’s competitiveness in the U.S.

Third-quarter net income rose 8.9 percent to 903.3 billion won ($850 million) from 829.5 billion won a year earlier, the Seoul-based company said today. That missed the 943.5 billion won average of 31 analysts’ estimates compiled by Bloomberg.

A three-week strike at home cost the company an estimated 414 billion won in lost production, while sales in the quarter slumped 4.9 percent in the U.S., the carmaker’s biggest market, according to the company’s website. Kia, together with its biggest shareholder Hyundai Motor Co., is facing increased competition as a weaker yen gives Japanese carmakers an edge in the U.S.

“Strikes at home and falling sales in key overseas markets would have had an adverse impact on Kia’s earnings,” Lee Sang Hyun, an analyst at NH Investment & Securities Co., said before the earnings announcement. “The company is expected to make up for the loss from the strikes in the fourth quarter, and will be able to meet the annual target.”

The automaker forecast in January that deliveries will rise 1.1 percent to 2.75 million vehicles this year.

Kia’s shares rose 0.5 percent to 63,600 won as of 10:08 a.m. in Seoul trading. The benchmark Kospi Index slid 0.7 percent.

Union Strikes

Kia’s union workers in South Korea approved a wage deal on Sept. 12 that raised the monthly base salary by 97,000 won, ending strikes which caused more than 23,000 vehicles or 414 billion won worth in lost output, according to company estimates.

The stoppages, which began Aug. 21, led the automaker’s quarterly production in South Korea to be the smallest since last year’s third-quarter, according to the company’s website. About 58 percent of Kia’s manufacturing capacity is located at home. A strike last year, the company’s first since 2009, had caused a record 62,890 vehicles in lost output. It had cut Kia’s production in South Korea by 9.2 percent.

The won has gained 25 percent against the yen in the past year, curbing Kia and Hyundai’s competitiveness against Japanese automakers, which are also big exporters to the U.S.

Slowing Sales

Kia’s incentives in the U.S. jumped 12 percent through September from a year earlier. That compares with a 2.2 percent decline in Toyota’s incentives and the market average of a 2.4 percent increase, according to Autodata Corp.

The company’s sales fell 4.9 percent in the U.S. market last quarter, according to its website. Its deliveries rose 1.5 percent in Europe in the July to September quarter.

Sales in China rose 9.8 percent to 131,410 units in the last quarter, trailing behind the market average of 14 percent increase, according to data compiled by Bloomberg. Competition is expected to intensify as Japanese automakers including Toyota Motor Corp. and Nissan Motor Co. rebound from declining sales that began last year after a territorial dispute led to violent anti-Japan protests in the world’s biggest auto market.

To contact the reporter on this story: Rose Kim in Seoul at rkim76@bloomberg.net

To contact the editor responsible for this story: Young-Sam Cho at ycho2@bloomberg.net

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