Headed for a fourth straight annual profit decline, Hyundai Motor is trimming its cost fat; scaling back on business class flights and annual family home trips for overseas employees, executives told reporters.
The South Korean automaker has been hit by its exposure to weak emerging markets, and a product line-up that features more sedans than sport utility vehicles (SUVs), just as SUVs have become more popular across many global markets.
The belt-tightening — which also includes cutting back on printing and fluorescent light bulbs — aims to buy Hyundai time to prepare new models and a design revamp.
Photo: Reuters
“We’re trying to address a mismatch between the market trend and our product line-up,” said one Hyundai insider, referring to a need for more SUV models.
“That’s a longer term plan. For now we’re trying to save every penny,” he said, declining to be identified because the plans are not public.
Since October, Hyundai Motor Group executives have taken a 10 percent pay cut, the first such move in seven years. The number of executives at Hyundai Motor alone has risen by 44 percent in five years, to 293 last year.
The group has also downgraded hotel rooms for executive travel and is encouraging video conferencing as a cheaper alternative to travel, insiders said.
“We’re in emergency management mode,” said another insider, who did not want to be named as he is not authorized to speak to the media.
In a response to Reuters for this article, Hyundai Motor said it is “making various cost-saving efforts,” with shrinking global demand and growing business uncertainty, but did not elaborate.
Other costs, such as low-margin supplier parts and labor at the heavily-unionised automaker, are tougher to pare back, said Ko Tae-bong, analyst at Hi Investment & Securities, adding that Hyundai also needs to spend more on research and development in self-driving and other new technologies.
While Hyundai remains cash-rich, its costs as a proportion of revenue have risen for five straight years, to 81 percent so far this year, regulatory filings show.
“Cutting expenses are stopgap measures, and won’t do much to improve its bottom line,” Ko said, calling them more “symbolic.”
SALES DECLINE
Hyundai grew quickly after the global financial crisis, with brisk sales of its Sonata and Elantra sedans. It was the only major automaker to increase sales in the US in 2009.
However, it has struggled to maintain that momentum as rivals’ sales of SUVs have boomed and emerging market economies have weakened. Hyundai Motor shares have fallen 40 percent in the past three years, the worst performer among global automakers.
The automaker’s top US executive has resigned, and the South Korea sales chief and China head have been replaced.
Sales of Hyundai cars, and those of its affiliate Kia Motors, could drop to 8 million this year, a first decline since Hyundai bought its smaller domestic rival in 1998, Ko said.
For next year, Hyundai-Kia executive vice president and research head Park Hong-jae, expects sales to pick up again.
“It was a difficult year this year. Things will get better,” he told reporters on Thursday last week, citing recovery in markets such as Brazil and Russia.
Another Hyundai source said the group has trimmed its preliminary sales target for next year to 8.2 million vehicles, from 8.35 million forecast in the middle of this year.
MORE SUVS
While it looks to manage its staff budget, Hyundai is beefing up its SUV offerings, freshening up its Sonata sedan, and redirecting exports from slow-demand markets such as the Middle East to the US.
In the US, SUVs accounted for 28 percent of Hyundai’s sales in January to last month, up from 23 percent a year earlier, according to Autodata Corp, but less than half the industry average.
At its plant in Montgomery, Alabama, Hyundai has replaced some Sonata production with its popular Santa Fe SUV.
Next year, Hyundai will look to plug a gap in its SUV offerings for developed markets by making a sub-compact model — under the project name “OS” — in South Korea for sale at home, in the US and Europe, people inside the company said.
Hyundai makes sub-compact SUVs locally in China, India and Russia.
“We need that small SUV in the US, much sooner than later,” said Scott Fink, one of Hyundai’s biggest US dealers.
DAMAGE REPORT: Global central banks are assessing war-driven inflation risks as the law of unintended consequences careens around the world, spiking oil prices Central banks from Washington to London and from Jakarta to Taipei are about to make their first assessments of economic damage after more than two weeks of conflict between the US and Iran. Decisions this week encompassing every member of the G7 and eight of the world’s 10 most-traded currency jurisdictions are likely to confirm to investors that the specter of a new inflation shock is already worrying enough to prompt heightened caution. The US Federal Reserve is widely expected to do exactly what everyone anticipated weeks ahead of its March 17-18 policy gathering: hold rates steady. The narrative surrounding that
Apple Inc increased iPhone production in India by about 53 percent last year and now makes a quarter of its marquee devices there, reflecting the US company’s efforts to avoid tariffs on China. The company assembled about 55 million iPhones in India last year, up from 36 million a year earlier, people familiar with the matter said, asking not to be named because the numbers aren’t public. Apple makes about 220 million to 230 million iPhones a year globally, with India’s share of the total increasing rapidly. Apple has accelerated its expansion in the world’s most populous country in recent years, bolstered
Taiwan Semiconductor Manufacturing Co’s (TSMC, 台積電) share of the global foundry market rose to almost 70 percent last year amid booming demand for artificial intelligence (AI), market information advisory firm TrendForce Corp (集邦科技) said on Thursday. The contract chipmaker posted US$122.54 billion in revenue, up 36.1 percent from a year earlier, accounting for 69.9 percent of the global market, TrendForce said. Its share was up from 64.4 percent in 2024, it said. TSMC’s closest rival, Samsung Electronics, was a distant second, posting US$12.63 billion in sales, down 3.9 percent from a year earlier, for a 7.2 percent share of the global market. In the
HEADWINDS: The company said it expects its computer business, as well as consumer electronics and communications segments to see revenue declines due to seasonality Pegatron Corp (和碩) yesterday said it aims to grow its artificial intelligence (AI) server revenue more than 10-fold this year from last year, driven by orders from neocloud solutions clients and large cloud service providers. The electronics manufacturing service provider said AI server revenue growth would be driven primarily by the Nvidia Corp GB300 server platform. Server shipments are expected to increase each quarter this year, with the second half likely to outperform the first half, it said. The AI server market is expected to broaden this year as more inference applications emerge, which would drive demand for system-on-chip, application-specific integrated circuits
RSS