Kia expects to shift to operating loss in H2
SEOUL-- Kia Motors Corp. said Thursday it expects to swing to an operating loss in the second half of this year due to declining sales and huge one-off costs.
In the first half, the affiliate of Hyundai Motor Co. already suffered a 44 percent on-year decline in operating profit to 786.8 billion won (US$695 million) largely affected by sharp sales declines in China amid bilateral diplomatic rows.
As it plans to reflect 1 trillion won worth of one-off expenses in its third-quarter bottom line, Kia Motors said it will "inevitably" post an operating loss for the July-September quarter. The carmaker expects that an operating loss in the third quarter could result in a second-half operating loss.
The one-off expense comes after the Seoul Central District Court ruled last month that fixed bonuses and meal costs are part of ordinary wages and that Kia should pay an overdue amount of 422 billion won (US$373 million), or 39 percent, of what the union had requested.
Under the court ruling, the company has to pay higher overtime, severance and other payments for its workers.
"As the court ruling applies to the three years from August 2008 to October 2011 this time, the union may file two additional suits to receive overdue payments for the periods from 2012 to 2017," a company spokesman said, adding a retroactive payment is allowed for the previous three years only.
That's why the company plans to reflect 1 trillion won as one-off costs in the third quarter, he said.
Meanwhile, Kia has decided to suspend overtime work at all three of its domestic plants. One is located in Gwangju in Jeolla Province, and the other two are in Sohari and Hwaseong in Gyeonggi Province. The reduced working hours go into effect Monday and reflect declining sales and increased inventory.
Under the decision, Kia workers do not have to work 30 minutes of overtime per day. This month, they haven't worked on weekends due to lower demand, the company said in a statement.
In the January-August period, Kia sold 172,674 vehicles in China, down 53 percent from 368,686 units a year earlier. In the United States, sales fell 8.4 percent to 405,462 from 442,544 during the same period.
China has taken steps against South Korean products since March in retaliation for the installation of a Terminal High Altitude Area Defense (THAAD) system. Beijing has argued that the THAAD system could spy on its military, though Seoul has insisted it is directed purely against missile threats from North Korea.
Source: Yonhap News Agency