Sales Plunge amid COVID-19 Crisis
Global credit rating agencies are revising down their credit rating outlooks on Hyundai Motor and Kia Motors as their earnings decline has become apparent.
The labor and management of Kia Motors are discussing a plan to shut down Sohari 1 and 2 Plants and Gwangju 2 Plant from April 23 to 29 as three out of 10 cars they produce remain unsold.
These factories mainly produce automobiles for exports. They produced and sold 58,831 units in April 2019, but in 2020, the figure dropped by 16,430 units on year in the wake of the COVID-19 outbreak. Even if the factories make cars at their full capacity, 16,000 units will remain unsold in April.
Earlier, the management of Kia Motors explained to the labor union on April 10 that the automaker could not export cars abroad, so it was necessary to shut down some of its plants to adjust production volume.
In the aftermaths of the pandemic, Hyundai Motor and Kia Motors' business performances are highly likely to deteriorate, so global credit rating agencies are lowering their rating outlooks on the two automakers.
International credit rating agency Fitch lowered its long-term issuer rating (IDR) outlook on Hyundai Motor and Kia Motors from “stable” to “negative.” However, their IDRs were maintained at “BBB+.” Fitch said it took the action in consideration of the negative impact of COVID-19 on the two carmakers’ performance and financial conditions. It forecast that global auto sales in 2020 are expected to fall 15 percent from 2019.
Standard & Poor's (S&P) also recently placed Hyundai Motor Group affiliates' credit ratings in negative observation. Moody's chose the credit ratings of Hyundai and Kia Motors as items to be reviewed for drops in credit ratings in March.