Hyundai cuts contracts with 5 credit card firms

Hyundai Motor announced that it has terminated contracts with several major Korean card companies due to a dispute over commission fees on Monday.

The card issuers that Hyundai has fallen out with are Shinhan Card, the country’s largest card company, KB Kookmin Card, Samsung Card, Lotte Card and KEB Hana Card.

“Hyundai Motor has protested the abrupt hike in commission fee rates and will end contracts on March 10 with five card companies that pushed ahead with the increase without a proper reason,” the company said in a statement.

Still, the automaker left the possibility of negotiations open if the estranged companies are willing to talk.

Hyundai’s move came after the credit card companies pushed up commission fees earlier this month for partnered companies with annual sales of 50 billion won ($44 million) - including the automaker - starting March. The increase, from 1.8 percent to 1.9 percent, industry insiders say, is intended to cover the losses following the financial regulator’s push to lower fees charged on businesses with less revenue.

Not all card issuers are at odds with Hyundai.

NH Nonghyup Card, BC Card, Citibank and its own credit card affiliate Hyundai Card all said that they will maintain their rate this year.

The automaker said that the hike adds to the headwinds the company is already facing such as low profits and losing ground in overseas markets.

“Hyundai Motor’s operating profit margin stood at 2.5 percent [last year], the lowest since we adopted International Financial Reporting Standards [IFRS],” a spokesperson at Hyundai said.

The IFRS is a relatively new accounting standard which all Korean companies have been required to use since 2010.

“If we only count the car-making business, the rate will go further down to 1.4 percent, which is lower than Shinhan Card’s 1.88 percent.”

Hyundai Motor brought up the example of other automakers - GM Korea and SsangYong Motor - to make a case for the negative impact of a rate change.

“GM Korea posted accumulated loss amounting to 3 trillion won over the past four years and SsangYong Motor also suffered losses since the first quarter of 2017,” the company said. “It has been said that they have also expressed concerns.”

BY PARK EUN-JEE [park.eunjee@joongang.co.kr]