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Fitch revises outlook on Hyundai Motor and Kia to negative

All News 16:22 April 14, 2020

SEOUL, April 14 (Yonhap) -- Global credit rating agency Fitch Ratings has revised the rating outlooks on Hyundai Motor Co. and its affiliate Kia Motors Corp. to negative from stable citing the impact of the coronavirus pandemic.

Hyundai Motor and Kia Motors have suspended most of their overseas plants in line with measures meant to contain the spread of the COVID-19.

"The negative outlook reflects concerns that the ongoing coronavirus pandemic will have negative impact on the company's operating performance and financial profile, especially in 2020, and delay the recovery in the company's profitability," Fitch said in a report posted on its website on Thursday.

"It also reflects the uncertainties regarding the length and magnitude of the expected downturn in the global automobile industry."

This photo, taken March 18, 2020, shows vehicles lined up at Hyundai Motor's port in Ulsan, about 410 kilometers southeast of Seoul. (Yonhap)

Still, Fitch said it believes Hyundai and Kia have the financial flexibility to manage the downturn in the industry, citing robust liquidity.

At end-2019, the two carmakers -- flagship units of Hyundai Motor Group -- had combined net cash of over 14 trillion won (US$11.5 billion) and total cash of around 31 trillion won, according to Fitch.

Hyundai has seven domestic plants and 10 overseas plants -- four in China and one each in the United States, the Czech Republic, Turkey, Russia, India and Brazil. Their combined capacity reaches 5.5 million vehicles.

Kia has eight domestic plants and seven overseas ones -- three in China and one each in the U.S., Slovakia, Mexico and India. Their overall capacity is 3.84 million units.

Among them, Hyundai's plants in South Korea, China and Russia are up and running while Kia's production facilities in South Korea, China and Slovakia remain open.

Fitch said overseas sales of Hyundai and Kia are likely to be significantly lower in April and May, but it said domestic sales will remain less affected as South Korea has so far been able to avoid drastic measures such as lockdowns.

Domestic sales account for less than 20 percent of both companies' sales volume but enjoy higher average selling prices and account for a larger share of profit.

Fitch said Hyundai and Kia are better positioned than some global competitors, especially European and U.S. automakers which face effective shutdowns in their home markets in the near term.

From January to March, Hyundai sales fell 11 percent to 904,746 units from 1,021,391 in the same period a year ago. Kia sales declined 0.9 percent to 644,102 autos in the first three months of this year from 649,896 in the same period of last year.

Last month, Moody's Investors Service placed the ratings of Hyundai and Kia on review for downgrade due to the coronavirus outbreak.

entropy@yna.co.kr
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