Analysts in the securities industry predict that if Hyundai Motor’s total strike materializes, the company may shoulder an operating loss nearing 1 trillion won solely from the strike.
According to securities sources on Sept. 5, if the Hyundai Motor strike becomes a reality, there are expectations of losses amounting to 4.2 trillion won in sales and 1 trillion won in operating profit. This estimate assumes a production loss of 116,000 units, which is midway between the strikes in 2016 and 2017. If the strike prolongs, the losses could grow exponentially.
Hyundai Motor previously saw production losses of 142,000 units in 2016 and 89,000 units in 2017 due to total strikes. The operating losses at that time were approximately 3.1 trillion won and 1.89 billion won, respectively.
The estimated loss per vehicle due to the potential strike this fall is about 36.19 million won, which is notably higher than the 21.83 million won and 21.24 million won in 2016-2017. This implies that if the duration of the strike remains consistent, the impact of the strike will be much larger.
A current concern is Hyundai Motor’s insufficient stock. As of the end of July, according to the automotive industry, Hyundai Motor’s domestic inventory is approximately 15 days, and the global inventory is about 40 days. This means that if a strike occurs, domestic sales, which relatively lack inventory, will likely be more adversely affected.
In light of the current situation, the crux lies in the intensity with which the union will strike. A production disruption of up to 10% of the monthly production volume can be compensated through overtime and special shifts after the conclusion of wage and collective bargaining agreements. However, if the strike extends beyond this, it could create a hole in the business plan. While some believe that these setbacks can be offset within the year, realistically it’s predicted that recovery will be challenging within the third quarter.
Some believe that the shock of the total strike could cause Hyundai Motor’s Q3 operating profit growth to falter. Hyundai Motor recently posted its highest operating profit for three consecutive quarters. According to financial information company FnGuide, as of today, Hyundai Motor’s Q2 operating profit consensus (forecast) is expected to decrease by 30% to 2.9666 trillion won from the previous quarter’s 4.238 trillion won.