Hyundai Motor's Credit Rating Upgraded to Investment Grade

Moody's Upgrades Ratings of Hyundai Motor to Baa3

SEOUL, South Korea, Nov. 29 -- Financial ratings agency Moody's Investors Service has upgraded Hyundai Motor Company's senior unsecured rating from Ba1 to Baa3, recognizing Hyundai Motor Co.'s commercial paper as investment grade for the very first time in the Korean automaker's 37-year-long history.

"This is great news for everyone, especially our shareholders and is a big vote of confidence in our management team. It proves our strategies are on the right track," said Kim Dong-Jin, vice chairman and CEO of Hyundai Motor Co. "Our goal to be recognized as a world leader in automotive quality remains unchanged," he added.

At the same time, Kia Motors Corporation's (Kia) senior unsecured rating and issuer rating was also upgraded to Baa3 from Ba2. The assignment of the same rating level to the two companies considers their high degree of operational and management integration. The rating action concludes the rating review initiated on September 7, 2004. The rating outlook is stable.

The rating action reflects Moody's expectation that HMC's and Kia's overall earnings and credit profile will continue improving, supported by their solid positions in the Korean automotive market and strengthening global market positions as a result of regional diversification. It further incorporates Moody's belief that HMC and Kia will be able to maintain their sound financial positions over the intermediate term.

HMC turned Kia into a consolidated subsidiary after acquiring it in 1999, and Moody's notes that together the companies have more than 70% share of the Korean automobile market. The two entities have shown considerable progress toward integrating many areas of operations, including platforms, R&D and parts purchase. Moody's expects the two to further integrate their operations and group strategy, and that the high degree of integration has resulted in no material difference in their credit quality.

The rating agency further acknowledges that significant synergies between HMC and Kia are appearing and that their operating efficiencies and cost structures have improved over the past few years as a result.

HMC's revenue growth has been strengthened by successful model renewal and export sales. The company has demonstrated an ability to increase market share in the domestic and global markets even under challenging operating environments, such as those presented by weak domestic demand and intensified competition with other global players.

HMC continues to have a solid market position in Korea -- 50.1% market share for January to October 2004 -- while increasing its share in overseas markets. HMC grew its US market share to 2.5% for the January to October 2004 period, from 1.4% for 2000. It also increased its market share to 2.1% in Europe from 1.5% over the same time -- and Moody's expects this trend to continue.

In addition, HMC has boosted vehicle sales in developing countries such as China and India. The company is particularly strong in India, with a 16.5% market share. Moody's estimates that HMC is likely to sell over 215,000 units in India in 2004, showing substantial improvement from 150,000 units a year earlier. As a result of the overseas expansion, HMC has increasingly diversified its revenue structure.

As the domestic market in Korea is mature and competition has been intensifying, Kia has increased its presence in overseas markets. Growth in overseas sales has partially offset domestic weakness and contributed to a rise in the company's overall profitability. Kia is currently focusing on China and Europe, where it expects demand for its brand to grow. For 2004, Moody's sees the company as likely to sell 215,000 units in Europe -- significant expansion from about 150,000 units in 2003 -- and 80,000 units in China, up from 51,000 units in 2003.

The constant introduction of new models -- along with enhanced marketing efforts, which help strengthen Hyundai's and Kia's brand recognition -- should contribute to growing sales and raising their global market position over the intermediate term, in Moody's opinion.

In line with their management strategy to increase market share globally and meet growing demand for their brands, HMC and Kia have been actively investing overseas. In Moody's view, their business strategy -- which includes opening a new plant in Alabama in 2005 and another in Slovakia in 2006 -- will lead to a further strengthening of their overseas operations. As a result, Moody's anticipates a high level of capital expenditures from the companies for the next three years, but believes they will maintain investments within cash flow.

Moody's expects that both companies will continue reducing debt and that their financial position will thus improve over the intermediate term.

Established in 1967, Hyundai Motor Co. has grown into the Hyundai Kia Automotive Group which includes over two dozen auto-related subsidiaries and affiliates. Employing over 50,000 people worldwide, Hyundai Motor posted US$20.8 billion in sales in 2003 (on a non-consolidated basis). Hyundai motor vehicles are sold in 193 countries through some 5000 dealerships and showrooms. Further information about Hyundai Motor Co. and its products is available on the Internet at http://www.hyundai-motor.com/