SEOUL, Nov. 17 (Yonhap) -- Fitch Ratings said Tuesday that it holds a negative outlook on two South Korean carmakers -- Hyundai Motor Co. and its affiliate Kia Motors Corp. -- due to uncertainties over the COVID-19 pandemic and hefty quality-related expenses.
Fitch holds the BBB+ rating for the two Korean carmakers with negative outlook despite their "resilient performance" since the start of the pandemic this year.
Hyundai and Kia's operations and profitability have been resilient so far, and Fitch expects them to post normalized operating profit in 2020 that is close to 2019 levels due to strong Korea sales, Fitch said in a recent report.
"Nevertheless, the uncertainty over a further recovery in market demand could delay a sustained recovery in (their) profitability to levels commensurate with a 'BBB+' rating," it said.
In October, Hyundai and Kia, which together form the world's fifth-biggest carmaker by sales, sold a combined 113,489 vehicles in the world's most important U.S. automobile market, up from 107,101 units in the same month of last year.
Hyundai and Kia put aside 2.1 trillion won and 1.26 trillion won, respectively, in provisions for the recall of a faulty engine and preemptive measures for quality management, which was reflected in their third-quarter results.
Improvement will continue in the fourth quarter, but any additional lockdowns or restrictions could weigh on sales in major markets such as the U.S., it said.
Short selling revisited on retail investors' increased sway
Legislation on compensating virus-hit small biz picks up steam
(News Focus) S. Korea drums up measures to revive consumption, create jobs next year amid pandemic
S. Korean companies bet big on hydrogen for zero-emission goal
S. Koreans feel pinch of rising housing costs amid economic downturn