Hyundai Motor Group said about 1,000 of its executives will take a 10 percent pay cut, the first such move in seven years at South Korea’s second-largest conglomerate that shows the harsh impact of market share woes and labour strife at its flagship firm. The pay cuts affect executives at 51 group companies, a spokeswoman at flagship Hyundai Motor Co said. The spokeswoman said the cuts are voluntary and are applicable from this month but declined to say how much the group expects to save from the move or which ranks of executives will be impacted.
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Once industry outperformers, Hyundai Motor Co and affiliate Kia Motors are grappling with falling market share in its major markets such as China and South Korea, as well as slowing demand in other emerging markets.
Hyundai Motor Co, the world’s fifth-biggest automaker together with Kia, is expected by analysts to report a lower-than-expected third-quarter profit on Wednesday, squeezed also by a protracted strike, which was resolved earlier this month..
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“The pay cut is not that much, but symbolizes the severity of the difficulties Hyundai Motor Group is undergoing,” said Chung Sun-sup, chief executive of corporate research firm Chaebul.com.
Hyundai Motor Co’s woes are also impacting the broader South Korean economy. The country’s central bank said on Tuesday the economy, powered by export-driven manufacturing firms, would have grown faster in the third quarter, were it not for the setbacks suffered by Samsung Electronics Co Ltd and Hyundai Motor Co.
At a time when its rivals are benefitting from strong demand for sport utility vehicles, Hyundai Motor Co is grappling with slowing demand for its mainstay sedans like Elantra and Sonata.
Hyundai is also heavily reliant on sales in emerging markets like Russia and Brazil, making them vulnerable to slowing sales in those countries.
Earlier this month, Hyundai Motor replaced the heads of both its South Korean and China operations.
“We are worried about next year’s outlook,” a group executive told Reuters.
Yonhap News Agency, which earlier reported the Hyundai pay cuts, said this is the first executive pay cut at the group since 2009.
Hyundai Motor Co shares were up 3 percent in afternoon trading on Tuesday, against a 0.5 percent fall in the main Korean stock index.