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(News Focus) Hyundai Motor stands to gain from GM bankruptcy: analysts
By Kim Deok-hyun
SEOUL, May 28 (Yonhap) -- Hyundai Motor Co. may not have to worry much about a bankruptcy filing by General Motors Corp. as troubles at the world's No. 2 carmaker are widely expected to help the South Korean company boost sales in the U.S., analysts said Thursday.
They note, however, that it is unclear whether Hyundai and its affiliate Kia Motors Corp. would be able to maintain long-term gains in the U.S. market if a restructured, post-bankruptcy GM regains momentum with more fuel-efficient compact cars.
After last-minute negotiations with its bondholders on a debt-equity swap failed, GM is almost certain to apply for Chapter 11 protection within days. Once accepted, it would be the biggest industrial bankruptcy in history.
GM, which was overtaken by Toyota Motor Corp. of Japan as the world's largest car company last year, has been sustained by federal loans and is facing a June 1 deadline set by the U.S. government to prove its viability or file for bankruptcy protection.
"This is a golden opportunity for Hyundai and Kia to increase their combined market share to 10 percent," said Suh Sung-moon, an auto analyst at Korea Investment & Securities Co., citing sharp declines in sales of GM and Chrysler LLC., which also filed for bankruptcy protection about a month ago.
Currently, Hyundai and Kia hold a combined 7.4 percent share of the U.S. market, according to Suh.
"It's too early to predict how a bankruptcy filing by GM would affect the South Korean automotive group, but it's certain that Hyundai and Kia would seize an opportunity to increase sales there," the analyst said.
Bok Deuk-kyu, a research fellow at Samsung Economic Research Institute, said in a report that Hyundai and other European rivals such as Volkswagen AG and Fiat SpA will likely use the current crisis in the auto industry as a "springboard for growth."
"These companies have maintained their financial condition through restructuring and made continuous efforts to improve quality and product competitiveness," Bok said.
In the first three months of this year, Hyundai's market share in the U.S. rose 1.6 percentage points from a year earlier to 4.3 percent.
Armed with a generous incentive program that allows U.S. customers experiencing financial difficulties to return their vehicles free of charge, Hyundai aims to boost its U.S. market share to 5 percent this year.
Under the program, those who purchased a Hyundai vehicle but can not make their payments due to layoffs, personal bankruptcy or accidental health issues can return the vehicle within a year of purchase.
One drawback for Hyundai is the South Korean currency's appreciation.
The won has advanced nearly 25 percent versus the U.S. dollar since early March, when it touched an 11-year low.
A strong won makes Hyundai cars expensive in the U.S. and erodes the foreign-exchange proceeds it can earn.
Even with a sharp decline in the won's value against the dollar for the first-quarter of this year, Hyundai reported a 42.7 percent plunge in net profit for the quarter.
"The won's strength in the second quarter would test how Hyundai has bolstered its competitiveness," said Stephen Ahn, a senior analyst at LIG Investment & Securities Co.
"Investors need to confirm whether Hyundai could maintain its sales momentum despite the unfavorable currency," Ahn said.
Officials at Hyundai's public relations team declined to comment.
Early this month, Hyundai Motor Vice Chairman Yoon Yeo-chul said the South Korean auto industry should embrace the current turmoil in the global auto market as an opportunity to raise its profile and win sales worldwide.
"The global auto industry is facing a tumultuous situation where no one can see into the near future," Yoon told an industry gathering in Seoul.
"But we need to prepare for opportunities that will arise after the crisis has passed," Yoon said.
(END)
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