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Strong won, strikes hit Hyundai and Kia 3rd quarter profits

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Hyundai Motor Co. and its affiliate Kia Motors Corp. on Monday blamed a strong Korean won and production losses from summer strikes for poor third-quarter earnings results.

Hyundai, which together with Kia forms the world's sixth-biggest automaker, said net profit for the quarter ended Sept. 30 dropped 47 per cent from the same period last year.

Kia reported its first quarterly loss since 1998.

Hyundai's profit was 282.8 billion won (US$299 million), down from 535 billion won a year earlier and worse than the average forecast of 420 billion won by 12 analysts. Sales fell 4.2 per cent to 5.89 trillion won ($6.23 billion).

Kia's net loss of 43.9 billion won ($46.4 million) compared with profit of 75.9 billion won a year earlier. Increased marketing costs were also a factor, the company said. Sales at Kia rose 8.3 per cent to 3.5 trillion won ($2.3 billion).

``The key fact is the strike effect,'' Yong Dae-in, an analyst at Goodmorning Shinhan Securities in Seoul, said of Hyundai's results, which he said contributed to lower-than-expected sales volume.

Hyundai's strike, which began in late June and ran through most of July, caused production losses of 93,882 vehicles and pulled the company's domestic market share down to a record low of 30 per cent in July.

The number of vehicles sold fell to 339,213 in the third quarter, down from 360,856 the year before.

The walkout was the second costliest ever at the company, where the union has gone on strike every year but one since being formed in 1987.

Kia also had labour troubles during the period, with 23 days of strikes between July 18 and Aug. 31.

The U.S. dollar traded at 945.20 on average against the Korean won during the third quarter, down 8.9 per cent from 1,038 won in the same period last year. A stronger won can make South Korean products more expensive abroad and lower the value of earnings in overseas markets when those are converted into the South Korean currency.

Hyundai also cited as a negative factor increased marketing expenses related to its sponsorship of the 2006 FIFA World Cup in Germany.

The Hyundai-Kia Automotive Group was buffeted by turmoil much of this year following the April arrest and jailing of Hyundai Chairman Chung Mong-koo on embezzlement and breach of trust charges related to a slush fund scandal.

Chung, 68, was released from detention in late June on bail and returned to work after spending time in a hospital. He is currently on trial.

Hyundai and Kia have delayed their earnings releases all three quarters this year. Monday's announcements were originally slated for last week.

Shares in Hyundai Motor, which released earnings just as the stock market opened, fell 1.5 per cent to 75,000 won ($79). Shares in Kia, which released results during mid-morning trading, gained 0.4 per cent to 14,150 won ($15).

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Strong won, strikes hit Hyundai and Kia 3rd quarter profits
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