South Korea’s Hyundai Motor Co. reported a third quarter operating loss of $277.4 million despite a 2.3% increase in revenue during the quarter — a result that confounded analysts who expected nearly $1 billion in operating profits.
The loss was driven primarily by charges the company was forced to take due to an ongoing issue with its engines. Hyundai and its sibling, Kia, taken a hit of about $5 billion to address the quality problem with the engines, which have been the subject of several recalls in the U.S. The company has simply replaced the engines in most cases.
If the charges related to the ongoing engine issue were removed, the company’s operating profit would jump to $1.6 billion. Instead, the company reported a net loss of $166.8 million. Overall, the quarterly revenue jumped to $24.4 billion for the period.
“Third-quarter results reflect engine-related provision expenses as the company took preemptive measures to ensure customer safety and cover any possible future increase in quality-related expenses,” Hyundai said in a statement.
“We sincerely apologize to our shareholders and investors for having repeated quality cost issues over three quarters since 2018,” an executive said during the company’s earnings call, according to Reuters.
The negative numbers get even larger when combined with its sibling’s, Kia Motors, results for the same period. The world’s fifth-largest automaker when combined with Kia reported a net loss of $297 million. The average of 12 analyst estimates compiled by Refinitiv was 1.2 trillion won, or about $1 billion, in profit., according to Reuters.
Adding to the company’s woes during the quarter, it sold fewer vehicles globally. The company sold 997,842 vehicles worldwide in the July-September period, a 9.6% decrease from the same period last year.
Total sales in markets other than Korea fell 15% to 798,791 units as industry demand remained weak in almost all markets around the world, the company noted. Sales in Korea rose 21.9% to 199,051 units, led by newly launched models such as Genesis GV80 SUV and G80 sedan as well as the Hyundai Elantra compact sedan.
Hyundai sold 2.6 million vehicles through the first nine months of the year globally. While the company posted a loss during the quarter, year-to-date it’s operating profits are $1 billion and its net income is $654.5 million.
Officials pledged to get the company back on the road to profitability, despite the global pandemic and currency problems, primarily through the debut of its aforementioned new vehicles, plus the addition of the new Tucson SUV and the second-ever Genesis ute, the GV70.
However, they didn’t stop there, adding they would be vigilant about preventing another problem like the engine quality issue, pledging to implement new processes to ensure a similar issue from happening again.