Hyundai Motor chairman orders cost cutting

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Hyundai Motor chairman orders cost cutting

Hyundai Motor Group Chairman Chung Mong-koo has ordered a 30 percent cut in operating expenses to help compensate for slumping sales at home and abroad.

Through May, the nation’s two auto giants, Hyundai Motor and Kia Motors, sold 3,274,931 cars, a 3.2 percent drop from a year earlier when they sold 3,385,534 units.

Mercedes-Benz’s sales in the first quarter increased 13.4 percent from a year ago, and BMW saw a jump of 8.2 percent. Volkswagen, which the Hyundai Motor Group considers its biggest rival, sold 1.9 percent more cars in the first quarter than a year ago. The company also had to deal with Japanese brands that have aggressively expanded market share thanks to the weak yen.

Cutting operating costs doesn’t mean Hyundai will spend less on research and development. In January, the group announced it would invest 80 trillion won ($71.2 billion) over four years, which includes 27.1 trillion won to expand car lineups. The company said those plans won’t be affected by Chung’s order.

“We might fall behind in the global market if we don’t strengthen our lineup and product competitiveness,” said a Hyundai Motor spokesman.

Hyundai Motor Group also is considering increasing sales incentives for dealers in the United States.

According to, the average incentive to dealers in May was $2,661 per car, while Hyundai Motor offered $2,345.

Recently, Hyundai Motor has been struggling in the United States, the world’s biggest market. After reporting gloomy sales in Korea, the company sold only 63,610 cars in the United States in May, a 10.3 percent year-on-year drop. Hyundai was the only major carmaker to suffer a double-digit year-on-year decline last month, and the U.S. market actually grew by 1.6 percent from a year earlier, with 1,634,592 total units sold, thanks to strong demand for SUVs and pickup trucks.

The turnaround in the past two months has come as a shock to the Korean automaker, after it had recorded the biggest monthly sales in the U.S. market in March with 75,019 units.

As sales in the United States have been falling, Hyundai Group’s market share has shrunk from 4.4 percent in May 2014 to 3.9 percent last month.

The Korean automaker’s struggle isn’t limited to the United States, as it has seen sales fall in other major markets, including emerging economies like China, Brazil and Russia.

The company’s global sales in May fell 6 percent year-on-year to 389,299 units.

Meanwhile, Chung also ordered the company to keep production lines clean to protect against MERS, which has infected 87 people in Korea and killed six. The company said it has established an emergency team of high-ranking executives to prepare for any potential infection of the work force.

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