SEOUL: Hyundai Motor Co said third-quarter profit plunged by a shocking two-thirds on Thursday, hit by a $440 million one-off charge related to US recalls and sending its shares tumbling.
The South Korean automaker has had to grapple with costs stemming from US airbag and engine-related recalls. A US safety group this month called for an expansion of the engine recall, citing a surge in fire complaints.
The recall headache adds to a plethora of issues of Hyundai, which has posted five straight years of annual profit declines due to weak sales in the United States and China, the world’s two biggest auto markets.
Quarterly net profit slid to 269 billion won ($236 million), the lowest amount in more than seven years and well below a SmartEstimate of 831 billion won, according to Refinitiv data.
Operating profit slumped 76 per cent while sales rose 1 per cent to 24.4 trillion won.
Shares in automaker finished down 6 per cent, their lowest level since March 2010. At one point they fell as much as 12 per cent.
“The one-off costs were too big, and the question is whether the costs will be just one-off or whether there will be more to come,” said Jung Yong-jin, an auto analyst at Shinhan Investment & Securities, adding that he did not expect a meaningful earnings recovery.
Hyundai predicted profit would rebound in the fourth quarter, helped by new SUVs, but did not elaborate.
The one-off charge will also cover expenses related to new technology aimed at detecting engine defects that will be used in existing and upcoming models.
“Transportation authorities in the US and other countries are taking a more rigorous and detailed look at quality matters than in the past,” Lee Hyang, a Hyundai quality executive, said during a conference call with analysts.
“We are continuing company-wide efforts to minimize additional quality problems going forward,” he added.
Hyundai also said sharp drops in currencies of emerging markets such as Turkey and Russia weighed on its bottom line. — Reuters
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