Hyundai Motor's net profit up 33% in 2005

Seoul January 27, 2006; Kim So-hyun writing for the Korea Hearald reported that Hyundai Motor Co. said yesterday its net profit last year surged 33 percent to a new high of 2.31 trillion won thanks to demand for its Sonata sedans and Santa Fe sport-utility vehicles in the United States and China.

Yet the carmaker's 2005 sales in the domestic currency dropped for the first time since 1998 by 0.3 percent to 27.4 trillion won largely due to the recent depreciation of the greenback. Hyundai Motor's exports declined 5.4 percent to 926 billion won although volume rose 0.4 percent compared to a year ago.

The Korean currency traded at an average of 1,036.66 won to the dollar in the fourth quarter, 5.4 percent more than the average of 1,092.64 in the same period in 2004.

Hyundai Motor sold 1.13 million cars abroad last year, more than double its sales at home which gained 3.4 percent.

Hyundai Motor's operating profit plummeted 30 percent to 1.38 trillion won with higher steel prices.

However, the automaker's ordinary profit gained 9.5 percent to 2.74 trillion won on increased earnings of its subsidiaries abroad and financial units Hyundai Card Co. and Hyundai Capital Services Inc., the nation's largest auto financing unit. Contributions from its financial subsidiaries were 145.2 billion won for all of 2005, said Hwang You-no, Hyundai's executive in finance.

"To minimize the exposure to the currency fluctuations, we will increase our production overseas," said Hwang.

"As the Alabama plant is scheduled to start rolling out the new Santa Fe SUVs this year, Hyundai's U.S. market share is expected to swell from 2.7 percent in 2005 to 3.2 percent."

Hyundai's U.S. plant which churned out 91,000 vehicles and saw a deficit of $110 million last year, is likely to reach full production of 300,000 units and run a surplus this year, Hwang said.

The carmaker has more than doubled U.S. sales between 1999 and 2004, to 418,615 units.

Earlier in the day, Hyundai Automotive Group said it set up an emergency management team to cope with the won's rise and other external business conditions such as higher oil prices and rising raw material costs.

Hyundai Motor set its 2006 business target based on expectations of the dollar buying an average of 950 won throughout this year.

Shares of Hyundai Motor fell 1.91 percent to close at 87,400 won on the Seoul bourse, underperforming the broad market index's 0.76 percent gain. Hyundai Motor announced the results after the market closed.

Aside from the external business conditions, poor labor relations have continued to weigh on Hyundai Motor, which aims to become one of the world's top five automakers by 2010.

On Monday, Hyundai Motor's labor union accused the company's top executive of expressing his intention to freeze wages this year.

The criticism came after Hyundai Motor Vice Chairman Kim Dong-jin appealed for the union to voluntarily freeze wages in a speech made on Jan. 11, citing the case of crisis-hit General Motors Corp. in the United States.

"We won't sit idle," the union said in a newsletter for its members, calling the appeal a head-on challenge to the union, which is known for its militancy in labor disputes.

During the speech, Kim warned that Hyundai Motor may see its productivity slip as the average age of its employees is rising and the company has a guaranteed retirement age of 58.

Since 1987, labor strikes have been an annual ritual at Hyundai Motor.

The company, run by 69-year-old tycoon Chung Mong-koo, is accelerating construction of its overseas plants as part of its efforts to avoid labor strife at home.

Hyundai Motor is currently building its second plant in China where the carmaker and affiliate Kia aims to reach annual sales of 1 million units by 2010. Hyundai is also building a second factory in India, targeting to expand its market share to 25 percent by 2010.