Kia Motors' 3rd-quarter loss widens amid labour unrest, sales decline

Kelly Olsen, THE ASSOCIATED PRESS

SEOUL, South Korea - Kia Motors Corp., South Korea's second-largest automaker, said Friday its third-quarter net loss widened from the year before on production losses due to labour unrest and a decline in sales.

Kia Motors lost 55.1 billion won (US$60.2 million) in the three months ended Sept. 30, the company said in a statement. Kia posted a net loss of 43.9 billion won a year earlier.

"We couldn't avoid an operating loss in the third quarter as our fixed cost burden increased due to production disruptions regarding wage negotiations, and a decline in sales," Kia president Cho Nam-hong said in a statement.

Sales during the quarter fell 6.7 per cent to 3.27 trillion won ($3.57 billion) from 3.5 trillion won a year earlier.

The company's loss at the operating level - sales minus the cost of goods sold - also widened to 116.5 billion won ($126.3 million) from 88.6 billion won the year before.

Kia is an affiliate of South Korea's Hyundai Motor Co.

Labor unrest at Kia caused total production losses during the quarter of 32,704 vehicles valued at 485.1 billion won ($533 million), according to figures provided by Ki Jin-ho, a Hyundai-Kia Automotive spokesman.

Kia workers staged strikes over a total of 10 days during the quarter in July and August over demands for a wage increase. Kia was hit by further unrest late in the quarter when contractors disrupted production in a dispute over wages and other demands.

South Korea's annual Chuseok autumn harvest holiday - which is based on the lunar calendar and generally lasts three or four days - fell in September this year. That was also a factor in weaker production, Ki said.

Shares in Kia fell 4.8 per cent to close at 10,85 won ($12). Kia shares have slumped 19 per cent this year.

The company's shares surged 14.9 per cent Thursday after legendary U.S. investor Warren Buffett mentioned having owned the shares. It was not clear if he still did.

Hyundai Motor said Thursday its third-quarter net profit rose 44.8 per cent as it suffered no production losses from labor unrest, as it did in the same quarter in 2006.

Strikes are common at the two automakers. Hyundai's union has walked off the job for one reason or another every year but one since it was established in 1987.

© The Canadian Press, 2007