X

[NEWSMAKER] Hyundai Motor struggles to contain fallout

By Korea Herald
Published : Oct. 10, 2016 - 16:10
Hyundai Motor, the world’s sixth-largest carmaker, is grappling with a series of distressing events including chronic disputes with its hard-core laborers and unfavorable market conditions.

Over the years, the nation’s largest carmaker has fought to maintain a lead in the market, competing globally through investments in research and development, brand value and design.


(Yonhap)


Despite its stellar performance in and out of the country, the carmaker is likely to continue having it rough for a while.

As of Friday, the carmaker has become the fifth-largest among listed South Korean companies, two notches down from the previous No. 3 spot. The market value of Hyundai Motor, the flagship company under the nation’s second-largest conglomerate Hyundai Motor Group, came to 30.07 trillion won ($27.1 billion), losing its previous position to Samsung C&T and SK Hynix, which beat the carmaker in terms of market value, with 31.4 trillion won and 30.7 trillion won, respectively.

Hyundai Motor has long been the No.2 market cap company after Samsung Electronics, before losing its status to Korea Electric Power Corp., after acquiring the state-run power company’s property in southern Seoul at an astronomical price of 10 trillion won. The market reactions to the carmaker’s decision was mixed with some rising concerns that the decision was too irrational and that the development project itself would not be as profitable as it may have thought.

The declined market value of Hyundai Motor also reflects concerns over its unfinished battle with unionized workers and the strong Korean won against the US dollar.

The labor dispute is likely to lead to a further drop in profits, fueling concerns over Hyundai Motor losing its global competitiveness amid the already deteriorating market conditions.

On Monday, Labor Minister Lee Ki-kweon warned against the extended strike by the automaker’s union members, calling them “high-paid workers ignoring the livelihood of employees at contract companies.”

The latest strike has been ongoing since the failed wage negotiation in July. The strike has been temporarily suspended this month, but the labor union was vowed to restart it unless negotiations are settled by this Wednesday.

Hyundai Motor has maintained its presence as the world’s fifth-largest carmaker. But it ranked sixth in terms of the total number of vehicles produced between January and July, according to the Korea Automobiles Manufacturers Association last month.

Market analysts have offered bleak prospects for Hyundai’s earning in the July-September quarter.

A Shinhan Investment Corp. report suggested that the carmaker’s sales could fall 9.5 percent to 21 trillion won from a year ago, along with operating profit plunging 12 percent to 1.3 trillion won.

The value of the Korean currency remaining strong against the greenback could also negatively impact local exporters including Hyundai Motor, other reports suggested.

The carmaker is also facing some legal glitches, including a prosecution probe over a complaint filed by the Transport Ministry over a delayed report of airbag defects found in its sports utility vehicle manufactured in June last year. The company said the defects have been repaired and the delayed report was an administrative error.

By Cho Chung-un (christory@heraldcorp.com)

MOST POPULAR

More articles by this writerBack to List