April 20, 2024

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[THE INVESTOR] Kia Motors’ second-quarter earnings could be dented by the wage lawsuit and uncertainties over its Mexico plant, said KTB Investment and Securities on March 17, downgrading its rating to a “neutral” from a “buy” and lowering the target price to 40,000 won (US$35.31) from 50,000 won.

The first ruling on the wage lawsuit will be announced in the second quarter, and judging from the case of Hyundai Wia, which was similar, there is a possibility that a 900 billion won one-time cost might be incurred, said analyst Moon Yong-gwon. 

If the US decides to impose over 10 percent tariff on vehicles from Mexico after NAFTA renegotiations, the motor company’s price competitiveness will weaken, noted the analyst. The automobile tariffs were abolished in January 2016.

Kia could export cars made at home to the US and those made in Mexico to Latin America and Asia-Pacific, but since the preferred makes are different, incentives would increase, said Moon.

As one-time profit from Hyundai Capital will be reflected in the first quarter, a downturn will be inevitable in the second quarter, added the analyst. 

By Hwang You-mee (glamazon@heraldcorp.com)