April 20, 2024

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[THE INVESTOR] A six-year low operating profit posted by Hyundai Motor in 2016 had a negative domino effect on the overall performance of related affiliates highly dependent on South Korea’s largest auto firm, company data showed on Jan. 31. 

Genesis G70

The suppliers’ heavy reliance on Hyundai Motor had exposed them to greater risk of being affected by the auto firm‘s disappointing yearly outcome, industry experts said.

Hyundai Motor posted an operating profit of 5.19 trillion won (US$4.46 billion), down 18.3 percent, between 2015 and last year, according to the company’s annual performance result.

The figure is lower than the 5.91 trillion won seen in 2010, when the carmaker started to comply with international financial reporting standards.

Hyundai Mobis, the country’s top auto parts maker, showed a 1 percent decline in operating profit, totaling 2.94 trillion won in the cited period.

It also recorded an operating profit margin ratio of 7.6 percent, down 0.5 percentage points.

Price competition with products made in China contributed to a 12.4 percent decrease in profit margin of Hyundai Mobis’ chassis module, which is the firm’s key business, said Kwon Soon-woo, an analyst of SK Securities.

Hyundai Steel, a steelmaker that supplies automotive steel sheet products to Hyundai Motor, saw its operating profit drop 1.3 percent to 1.44 trillion won. Its profit margin ratio also slid 0.4 percentage points.

Hyundai Wia, an engine and transmission supplier, saw a 47.6 percent sharp decline in operating profit of 263 billion won.

“It is time for Hyundai Motor to focus on recovering demand and shipments. This year, the auto firm will see the lowest level of inventory since 2013,” Kwon said.

The country’s No. 1 automobile manufacturer plans to strengthen its lineup by launching new models throughout the year, including a sport utility vehicle and a Genesis luxury sedan G70.

“We will focus on restoring our sales momentum through the release of a small SUV and other measures. We will make the most out of 2017 for us to get back on track,” Choi Byung-chul, a chief financial official of the automaker said during a conference call for the first quarter performance of Hyundai Motor last week.

By Kim Bo-gyung (lisakim425@heraldcorp.com)