Seoul - Hyundai Motor warned of increasing uncertainties
with the spread of trade protectionism and intensifying competition, after
reporting a 33 percent decline in operating profit due to domestic labour
strife and shrinking demand in Brazil and Russia.
Operating profit at South Korea’s largest automaker
fell to 1.02 trillion won ($875 million) in the three months ended Dec. 31,
missing the 1.45 trillion won average analyst estimate compiled by Bloomberg.
Net income declined for a 12th consecutive quarter, according to the
Seoul-based company.
Hyundai Motor will continue to monitor the policies of
President Donald Trump’s administration, which are expected to put pressure on
countries that have trade surpluses with the US, Koo Zayong, a vice president
at the automaker, said on a conference call Wednesday. He reiterated the plan
by Hyundai Motor to invest $3.1 billion in the US with affiliate Kia Motors in
the next five years.
The automaker stuck to its forecast of a rebound in sales
this year, made before Trump assumed office. Since his inauguration, Trump has
withdrawn the US from the Trans-Pacific Partnership trade accord, reaffirmed a
campaign promise to renegotiate the North American Free Trade Agreement
involving Mexico and met with automakers to persuade them to keep production
within the US.
Hyundai Motor’s spending on incentives in the US, its
second-biggest market, increased at a faster pace than the industry average
last month, according to researcher Autodata. Warranty expenses rose due to a
weaker won, eroding operating profit. The US business environment will be tough
this year because SUV sales will probably slow and rising interest rates will
hurt demand, Koo said.
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Shares of Hyundai Motor declined 3.1 percent to 142 000
won at the close in Seoul trading, the most since November 10. The benchmark
Kospi index was little changed.
The company’s deliveries in South Korea plunged in the
quarter after a series of partial stoppages escalated into a full-scale strike
in September and the expiry of a tax cut damped demand. The automaker also
faces consumer confidence running near an eight-year low and no early end in
sight to the presidential and corporate scandals. The nation’s gross domestic
product data released Tuesday showed an expansion of just 0.4 percent in the
three months through December, the weakest quarter-on-quarter performance since
June 2015.
Demand in China will probably slow this year on an
increase in the sales tax, said Koo. Hyundai Motor expects industry sales in
its largest market to slow to a 5 percent gain this year amid more intense
competition. The automaker’s SUV sales rose 43 percent last year in the
country, outpacing the 3 percent growth in sedan deliveries.