Hyundai’s Profit Fall Isn’t All That Bad

Posted by: Ihlwan Moon on January 22, 2009

Hyundai Motor’s announcement on Jan. 22 that its net profit fell 28% in the fourth quarter of 2008 isn’t really a bad piece of news. The highlight of the corporate results actually is the fact that the Korean company stayed in the black at this time of wrenching industry downturn. Hyundai managed to post a pre-tax profit margin of 3.6% in the three months to December and a margin of 5.6% for all of 2008.

No one is talking about better days ahead. Hyundai’s 2008 pre-tax profit of $1.3 billion represents a 19% fall from the previous year. And most probably, the company will again post a double-digit profit fall this year. Yet, despite all the predictions for a gloomy outlook, I have not seen anyone forecasting a loss for Hyundai in 2009.

The name of the game in the auto industry is whether players can survive the current storm. And the Korean currency’s weakness is helping Hyundai still make profits. The company acknowledges that it benefited from a 19% depreciation of the won against the dollar in 2008, when the Japanese yen gained its value against the greenback by 12%. If the won stays weak, sharpening Korean companies’ price competitiveness, Hyundai will most probably end up moving up the pecking order in the industry when people start buying cars again.

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