Hyundai profit tumbles in 2006

Operating profit for 2006 fell 11 percent and net profit declined 35 percent from a year earlier, Hyundai Motor Co. said yesterday. Strikes and the strong won were the main factors in the decline.
Sales revenue at the top automaker stood at 27.3 trillion won ($29.2 billion). Domestic revenue was up 7.4 percent, but exports dropped 5.3 percent. Hyundai also failed to meet its annual sales target, selling only 1.6 million cars, down 5.3 percent from the previous year.
The company did point out that if production from overseas plants in countries such as China, the United States and Turkey is taken into account, sales revenue for 2006 would be up 6.7 percent against 2005.
Operating profit totaled 1.2 trillion won, the lowest level since 2000.
“Exports have rapidly worsened, in large part owing to the plummeting won-dollar exchange rate,” said Park Dong-wook, head of the international management department at Hyundai. “Production losses from prolonged strikes by the labor union are also to blame for declines in business last year.”
Fourth-quarter sales fell 6.6 percent from 2005 to 7.58 trillion won, with operating profit declining 8.6 percent to 306.7 billion won. Analysts forecast Hyundai’s 2007 first-quarter profit would drop from last quarter.
Song Sang-hoon, an analyst at Hyundai Securities Co., which is not affiliated with Hyundai Motor, said, “Hyundai is scheduled to pay a 50-percent incentive bonus during the first quarter and additional labor fees for manufacturing employees who will be working weekends to make up for losses they caused during the walkout earlier this year.” Recovery in local demand should drive up second-quarter profit to an extent, he said.
Hyundai took action yesterday to boost overseas sales, moving its overseas marketing division from its marketing department to directly under its overseas sales department. The overseas sales department will now be responsible for overseas advertising, market research and sports marketing. So far, the department has only been in charge of controlling dealer networks, customer service and logistics.
An executive from the overseas sales department said, “As we turned out minimal profits from large auto markets such as North America and Europe compared with emerging markets such as India, the Middle East, China and Russia, we are trying to build up our shares in the significant countries.”
In related news, Mr. Park announced that the company would invest 3.8 trillion won this year, a record high, to rev up its global business. That amount is up 19 percent from a year ago, he said. The firm will set aside 1.3 trillion won to build overseas factories and 1.8 trillion won for research and development. The remaining 700 billion won will be spent on regular investment. This year the world’s seventh-largest automaker aims to attain 31.1 trillion won in sales revenue by selling 1.7 million cars inside and outside the country, which it will acheive by raising prices in the domestic market.

By Kim Tae-jin JoongAng Ilbo [spring@joongang.co.kr]