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Kia Motors swings to Q1 loss on strong currency, line shutdown

Kia Motors Corp. posted its third straight quarterly loss Friday, hit by a stronger South Korean currency, production losses from a line retooling and marketing costs.

Kia Motors, South Korea's second-largest automaker, lost 30.6 billion won ($33 million) in the three months ended March 31, the company said in a statement. Kia posted net profit of 38.4 billion won a year earlier. Sales during the quarter at Kia, an affiliate of Hyundai Motor Co., fell 12% to 3.85 trillion won ($4.2 billion). The loss was unexpected and came just two days after Hyundai Motor recorded its fifth straight quarterly decline. The average forecast of nine analysts surveyed by Dow Jones Newswires was for Kia to report net profit of 29.84 billion won ($32 million). Company spokesman Michael Choo said the loss resulted from the South Korean won's strength, the shutdown of a production line at the company's Hwaseong plant for a model addition and overseas marketing expenses.

Export-dependent Kia said that the US dollar weakened 3.7% against the South Korean won during the quarter from the year before. A stronger won makes Kia's exported vehicles more expensive in overseas markets and can also reduce the value of profits earned abroad when converted into won. Choo said that Kia incurred various overseas marketing expenses during the quarter, including those related to its new cee'd compact five-door hatchback being produced at the company's plant in Slovakia. The cee'd was conceived, designed and produced totally in Europe. "That is a very strategic model for us," Choo said in explaining the marketing push. The company sold 53,733 of the vehicles, which it began producing late last year, during the quarter, Choo said. The assembly line at the Hwaseong plant in South Korea needed to be reconfigured to prepare for the addition later this year of a second sport utility vehicle model to the line, Choo said. The changeover caused production losses of 22,000 Sorento mid-size sport utility vehicles, Choo said.

Kia said that sales of vehicles produced in South Korea declined 7.4% to 271,140 from the year before. Domestic sales gained 8.1% to 67,128, but exports, which accounted for 76% of domestic production, declined 11.6% to 204,012. The figures don't include vehicles made at Kia's at plants in China and Slovakia, where it has annual total annual production capacity of 430,000 vehicles, Choo said. He said sales figures for the China.made vehicles would not be available until Monday. Shares in Kia, which released earnings after the stock market opened, rose 0.5% to close at 11,200 won ($12). (mlive.com)