South Korea’s biggest automaker, the Hyundai Motor Group, facing lower global sales, has envisioned a strategy to reign on local operating expenses, with the cost cuts also set in balance with the upcoming sales figures for the third and fourth quarter.
Hyundai Motor and its affiliate Kia Motors reported global yearly deliveries had gone down by 6 and 5 percent, respectively, last month, with shares of Hyundai Motor on a dive of almost 20 percent since the start of the year – the worst performance among major world competitors. The domestic JoongAng Ilbo newspaper reported the group’s operating costs would be trimmed by 30 percent, but the company declined to specify if the given size is actually official. According to a group spokesperson, the envisioned expanse trimming would not affect the automaker’s research and development division or the sponsorship of the football governing body FIFA. But analysts believe it would be very hard for the company to lower the costs by trimming wages for example, as the unionized workers in South Korea are well known for being highly activist and retaliatory.
Even marketing fees and warranties could be intangible, says Samsung Securities auto analyst Yim Eun-young, with the most likely candidates being advertising, sales promotion events and commissions, which made the company last year spend around 1.4 trillion won ($1.25 billion) at home in South Korea. The analyst added Hyundai should try and support sales and production with incentives and while improving its financial sheet this year would be close to impossible, the situation would change in 2016 with the introduction of new models.