Hyundai Motor to Cut Costs as Vehicle Sales, Profit Decline

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Hyundai Motor Co. and its affiliate Kia Motors Corp. are reducing costs after sales and profit fell at the two Korean carmakers.

Hyundai and Kia are “making efforts to cut costs” after first-quarter operating profit declined, the carmakers said in a joint e-mail on Tuesday. They didn’t provide specifics on the cuts, or any estimate.

Operating profit at both Hyundai and Kia declined for a fourth consecutive quarter in the three months ended March 31. The Seoul-based automakers have posted declining vehicle sales as unfavorable currency-exchange rates undermine their ability to compete against the likes of Japan’s Toyota Motor Corp.

“The first thing they can cut would probably be costs related to sales, marketing and advertisement,” said Shin Chung Kwan, an analyst at KB Investment & Securities Co. “The current situation, and their efforts to cut costs, will also give them the power to have a say when negotiating terms for other costs that can be incurred, such as auto-part prices and workers’ wages.”

The JoongAng Ilbo newspaper reported earlier that Hyundai Motor Group is seeking to cut costs by 30 percent, citing an unidentified senior executive.

Hyundai rose 0.7 percent to 135,500 won at the close of Seoul trading. Kia gained 0.4 percent, while South Korea’s benchmark Kospi index advanced 0.1 percent. Hyundai shares have dropped 20 percent this year, in contrast to the 7.8 percent gain in the Kospi.

Won, Yen

A stronger won and a weaker yen have given Hyundai’s Japanese rivals a competitive edge in overseas markets. Last week, the Korean carmaker said domestic and overseas sales declined for a second consecutive month in May.

Hyundai has also missed out on a worldwide SUV boom, sparked in part by a decline in gasoline prices. None of its vehicles ranked among the 10 best-selling SUVs in the first quarter in China, its biggest market.

In April, Hyundai showed a version of its revamped Tucson SUV at the Shanghai auto show. The company said today it plans to sell 90,000 units of the new Tucson in U.S. next year. Hyundai will also introduce its new Creta SUV in India in the second half of this year.

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