Hyundai Motors to cut production costs and staff perks to increase profits

Automotive - Himanshu Gill - Dec 27,2016

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hyundai motors to cut production costs and staff perks to increase profits

Hyundai Motors has decided to trim production costs and cut down perks for overseas employees, in the wake of heading for a fourth straight annual profit decline.

The South Korean automaker is scaling back on business class flights and annual family home trips for overseas employees, as it was hit by its exposure to weak emerging markets and a production line-up that features more sedans as compared to sports utility vehicles (SUVs).

The company attributes the decrease in profits to the lacking SUVs in its vehicle line-up. Meanwhile, SUVs gained popularity globally, Hyundai has been unable to take advantage of the change as most of its line-up consists of sedans.

The saved costs would be aimed to prepare new models and a design revamp especially in manufacturing SUVs. This cost cutting even includes reducing printing and use of fluorescent light bulbs. Since October, Hyundai Motor Group executives have taken a 10 percent pay cut – the first time in last seven years. The number of executives at Hyundai Motors has been raised by 44 percent in the last five years, to 293 last year.

A spokesperson from Hyundai said that the company doesn’t have any specific long term plans other than just focusing more on the production of SUVs, thus it is just trying to save every penny. The group has also downgraded hotel rooms for executive travel, and it is encouraging the use of video calls as a cheaper alternative to travel.

Ko Tae-bong, analyst at Hi Investment and Securities, said that Hyundai cannot compromise with low-margin supplier parts and labor costs but it definitely needs to spend more on research and development in self driving, electric vehicles and other emerging technologies.

Hyundai’s top US executive has resigned, its Chinese head and the South Korean sales chief have been replaced; all in the wake of falling sales and revenues.