I'm watching Korea's car makers. They are a strong indicator of global demand's impact on the Korean economy, since Korea is a top 5 global auto export nation. I see Hyundai and Kia remaining strong and positioning for quick recover, not so with the other Korean car makers.
This Korea Herald gives some details....
[INDUSTRY FOCUS] Korean car makers face hard times, but U.S.-style crash remains unlikely
Before the current economic crisis began, the local automotive industry had high hopes for this year.
In February, the Korea Automobile Manufacturers Association projected that Korea's automobile production will rise 2.8 percent from 2007 to come in at 4.2 million units. For domestic sales, the KAMA had forecast a growth rate of 6.6 percent and an increase rate of 1.9 percent for exports. Although KAMA's projection overshot the actual growth rate, domestic automobile sales did rise during the first seven months of the year.
It wasn't until August the effects of the global slowdown began to be felt at home.
With the exception of a small lapse in June, domestic sales rose every month until July when compared to the same months last year, pushing up Jan.-to-July sales by 3.3 percent.
From August, however, things took a turn for the worse and local firms' domestic sales began to plummet, with the sales for the first 10 months of this year now trailing last year's by nearly 10,000 vehicles.
August's sales fell nearly 19,000 units and September sales dropped 13,000 units from a year ago. Although the decrease margin was reduced to 118 units last month, built up demand caused by supply problems earlier in the year was responsible for much of the month-on-month sales increase, leaving little reason to expect improvements this month. As sales fall and outlook becomes gloomier, carmakers have implemented cost saving measures.
Last month, Ssangyong Motor Co., whose January-to-October sales have fallen 32.6 percent from the same period last year, announced that 350 workers from the carmaker and associated firms, will be put on paid leave to reduce output until conditions improve. The company has also sold off a 40 billion won piece of land near its plant in Pyeongtaek, Gyeonggi Province.
GM Daewoo Auto and Technology Co. is also said to be considering shutting down its local facilities for 10 days at the end of the year.
The difference is that for GM Daewoo, the measures under consideration are in response to the changes in overseas markets rather than the domestic one.
"Our stock for the domestic market is at adequate levels but the backlog for exports is growing," said a GM Daewoo official.
"For overseas sales there is nothing much we can do directly to improve sales as we produce vehicles as requested by General Motors Corp.'s global network, but for the domestic market we plan to continue aggressive marketing and continue making investments to overcome the conditions."
The impact of the slowdown is being felt by big and small carmakers alike and, although to a lesser degree, Hyundai Motor Co.'s sales have dropped in some markets and it is unlikely to escape the slump unscathed.
Although the company's overseas sales during the first 10 months of the year have grown 12.9 percent from the same period last year, its U.S. sales fell 31 percent in October from a year ago and the output at its U.S. plant will be cut by 15,000 units this year.
The country's automotive industry has gone through and survived rough patches before. During the Asian financial crisis, domestic sales nearly halved from 1997's 1.5 million to 780,000 units in 1998, but the blow was softened by a rise in exports.
This time, however, Korean carmakers are unlikely to receive much help from exports as the European and U.S. automotive markets have been bogged down for some time.
According to KAMA, the country's car exports during the first 10 months of the year fell 3.6 percent from the same period last year.
"Before, when local sales fell, exports shored up sales and vice versa but many in the industry expect both domestic and overseas sales to fall next year, which would make the situation very difficult," said an official at a local carmaker. He added that instability in the world's economy is making things more difficult for carmakers.
"Although the majority view is that the current conditions will continue for sometime but there is no way of knowing for certain, which is making it very difficult even to draw up plans for the coming year."
With nearly 70 percent of cars produced in Korea being sold overseas, the global slowdown presents the greater danger for local firms.
"Next year the global automotive market is expected to contract by about 10 percent and a decrease of about 15 percent is expected for the U.S. market. The local market will be reduced down to about 1 million units, but it will not present too much of a problem," said Meritz Securities' senior research analyst Nam Kyung-moon.
However, he said that the U.S. auto industry's crisis is unlikely to be replayed here. He said that on top of the economic slowdown, U.S. car sales were dealt an additional blow in the difficulties experienced in the country's financial institutions.
"Due to U.S. financial companies' difficulties, installment plans for cars have dried up, amplifying the carmakers' sales decline. Although concepts about credit have also tightened here, the situation here has not deteriorated as much," Nam said. In addition, Nam said the weak won will help buoy local firms' earnings despite falling sales.
"For Hyundai Motor, sales 13 percent lower than last year's will translate into earnings similar to that of this year because the won has fallen."
No comments:
Post a Comment