Hyundai Motor won 1.3 trillion, Kia 1.540 billion won … “Theta 2 engine costs reflection”
Hyundai Motor and Kia will reflect the cost of quality of 2.9 trillion wins due to the Theta 2 GDI engine replacement rate increase in their earnings for the third quarter of this year, which will be announced soon.
Initially, the market was expecting the highest earnings in Q3, but considering the magnitude of the cost of quality, results should be weak.
Hyundai Motor Company announced on the 18th that it would reflect approximately 1.36 trillion won in quality costs as a provision for the third quarter of this year.
Kia announced that it incurred a quality cost of 1.54 trillion won.
Hyundai Motor Company and Kia Motors held a briefing session with domestic and overseas institutional investors and stock market analysts at 5pm the same day to brief them on specific details.
Securities analysts predicted that Hyundai Motor’s third-quarter operating profit would exceed 3 trillion won.
Kia is also expected to generate operating income of over 2 trillion won.
Relieving supply and demand for automotive semiconductors and high exchange rate. An analysis prevailed that factors such as strong sales of high-margin models, including SUVs, would work advantageously.
However, the quality cost of the Theta 2 engine, which caused a quality cost of 3 trillion won in the third quarter of 2020, also had an effect in the third quarter of this year.
As a result, earnings were far below expectations and it appears that investors were made aware of relevant information prior to the official earnings announcement in order to mitigate the market shock.
After the Theta 2 engine quality issue surfaced, Hyundai and Kia decided to implement a lifetime engine warranty program for vehicles equipped with the engine in 2019.
The quality costs related to this were 3.394 trillion wins, including 2.13 trillion wins for Hyundai Motor and 1.25 trillion wins for Kia, and was reflected in the performance of the 3Q 2020 as a measure, which was very successful for performance at that time.
The reason why the cost of quality related to the Theta 2 engine has been further reflected in two years is that the cost of the lifetime warranty program has increased e.g. a longer period of use of used cars due to demand issues and semiconductor supply and a lower scrap rate, resulting in higher engine replacement rates. As a result, quality costs are expected Hyundai Motor and Kia analyzed that the larger increase had an effect.
In addition, the reflection of the additional costs increased due to the sharp rise in the exchange rate and the reason for the increase in quality costs was the fact that the cost of providing an unprecedented lifetime engine warranty program was estimated and rationally reflected.
A Hyundai Motor Group official said: “This year’s cost per unit has decreased by about 21% compared to 2019 and the peak has already passed and is stabilizing.” We will actively implement the best measures, “he said.
/ yunhap news
