Hyundai Motor November sales flat, hit by strike

SEOUL Wed Dec 1, 2010 2:55am EST

SEOUL (Reuters) - Hyundai Motor (005380.KS) reported the worst November sales among South Korean automakers on Wednesday, as a prolonged strike at its biggest local production base hit output and sales of its best-selling subcompact car.

But shares of Hyundai jumped nearly four percent as the almost flat sales growth was better than most had feared, although Hyundai warned on Wednesday that it was seriously considering shutting down the affected plant in Ulsan due to a strike by temporary workers.

Since November 15, Hyundai's subcontracted employees have occupied the factory that produces subcompact cars such as the Verna and the new Accent, demanding the automaker convert their positions into permanent ones.

Labor unrest has often caused disruptions in Asia's fourth-largest economy, although Hyundai has avoided an annual strike by regular workers this year for the second consecutive year.

South Korea's auto industry typically faces strike action every summer but they avoided such industrial action this year amid the economic slowdown.

Hyundai said on Wednesday unionized workers also attempted to occupy another plant in Ulsan, disrupting output, while temporary workers at its Jeonju plant have also been waging a partial strike.

The industrial action has caused a production loss of about 220 billion won ($190 million) so far, Hyundai said.

"The strike will not have a major impact on its revenue because the affected plant produces (cheaper) subcompact models, and the South Korean currency remains favorable," Suh Sung-moon, an analyst at Korea Investment & Securities, said.

Hyundai saw its total sales rise by 1.4 percent to 314,569 units in November from a year ago, but domestic sales slumped 13 percent, also partly due to the high base effect.

Hyundai has refused to negotiate in what it calls an illegal strike and said a plant shutdown would slash affected regular workers' pay to 70 percent of normal levels.

Regular workers have not joined the strike yet and plan to vote on Friday whether to join the temporary employees' industrial action.

"It will be difficult for temporary workers to continue the sit-in strike as regular workers oppose it, and Hyundai Motor is getting tough with the strike," said Lee Sang-hyun, an analyst at NH Investment & Securities.

Kia (000270.KS), South Korea's No.2 carmaker, saw its monthly sales jump 33 percent to a record 222,116 units in November, helped by strong sales of new models such as K5 sedan and Sportage R SUV.

Growing concerns over European debt crisis may hit overseas sales in the coming months but Korean automakers are set to outperform the market, driven by new models, competitiveness in compact cars and a weak local currency, analyst say.

"Auto demand is expected to contract in Europe next year as the euro zone fiscal crisis persists. But Hyundai and Kia plan to launch a series of new cars next year and that will help them outperform the market," Lee at NH said.

($1=1155.7 Won)

(Reporting by Hyunjoo Jin; Editing by Jacqueline Wong)