Hyundai Motor Group to cut domestic operating expenses

Cuts more likely to hit expenses such as advertising, sales promotion events and commissions which totalled $1.25 billion last year

South Korea's Hyundai Motor Group, squeezed by slowing sales, plans to cut domestic operating expenses, with the savings depending on its sales performance in the third and fourth quarters, a spokesman said on Tuesday.

Hyundai Motor Co and its sister company, Kia Motors Corp, saw their global annual sales drop 6% and 5%, respectively, in May. Hyundai Motor shares are down about 20% in 2015, making them the worst performer among major global automakers.

The spokesman declined to specify the size of the cuts after JoongAng Ilbo newspaper said the group would cut operating costs by 30%, without citing a source.
 

 

The cuts would not include research and development or its sponsorship of the football governing body FIFA, the group spokesman said.

Samsung Securities auto analyst Yim Eun-young said it would be difficult for the group to cut costs such as wages for its unionised staff in South Korea as well as marketing fees and warranties.

She said the cuts were more likely to hit expenses such as advertising, sales promotion events and commissions, which totalled about 1.4 trillion won ($1.25 billion) last year in South Korea for Hyundai Motor and Kia.

"As of now, it is a better option for Hyundai to support sales and keep the capacity utilization rate by spending incentives," Yim said. "It will be tough for Hyundai Motor to improve its earnings this year, but surely it will see improved earnings next year thanks to new models."