Hyundai Motor 3Q profit falls 37.8 percent

[October 23, 2008]  SEOUL, South Korea (AP) -- Hyundai Motor Co. said Thursday its third quarter net profit fell 37.8 percent as labor unrest sapped production and warranty provisions increased. Sales declined.

The company, which along with affiliate Kia Motors Corp. forms the world's fifth-largest automotive group, also lowered its annual worldwide sales target amid weakening demand in the global auto industry.

Hyundai earned 264.8 billion won ($187.4 million) in the three months through September, the company said in a regulatory filing, down from 425.5 billion won in the same period last year.

Sales during the latest quarter fell 14.5 percent to 6.1 trillion won ($4.3 billion) from 7.1 trillion won a year earlier, Hyundai said.

In a separate statement, South Korea's largest automaker cited "production losses from strikes that extended over two months" for the profit decline.

A series of partial walkouts by Hyundai's labor union beginning in July over an annual wage agreement cost the automaker 44,646 vehicles in lost production worth 690.5 billion won ($484.1 million), Hyundai said last month.

Park Dong-wook, director of Hyundai's treasury division, told an investor relations conference that profit was also hit by a weaker South Korean won as the company needed to spend more of the local currency to cover overseas vehicle warranties denominated in U.S. dollars and euros, according to Hyundai spokeswoman Song Mee-young.

Hyundai did not say how much the won declined against the dollar during the quarter. Figures derived from the Bank of Korea Web site indicate a decline of about 15 percent year on year.

Park also said that Hyundai was lowering its annual sales target to 3.02 million vehicles from the previous 3.11 million, citing weakness in the global auto industry, according to Song.

Hyundai said earlier this week that it was shifting to a four-day work week at its U.S. auto assembly plant in Montgomery, Alabama through the rest of this year.

Production will stop for 11 days this quarter, which means about 11,000 fewer vehicles will be produced. The plant, which opened in 2005, produces the Sonata sedan and the Santa Fe SUV.

"The auto industry is faced with a difficult market environment, with the global financial crisis and slump in economic growth worldwide likely to extend," Hyundai said in its statement.

Still, the automaker took solace in what it said was a 3.1 percent decline in its worldwide vehicle sales during the third quarter despite what it described as "sharp downturns" in global markets.

Hyundai also said that sales for the first nine months of this year came to 2.2 million vehicles, up about 10 percent from the same period last year.

Shares in Hyundai Motor rose 1.2 percent to close at 50,700 won ($36).

[Associated Press; By KELLY OLSEN]

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