Hyundai Motor Company and Kia are facing challenges due to high tariffs from the Donald Trump administration. Recently, the value of the dollar has fallen sharply, worsening profitability, while labor unions have shown a willingness to demand large bonuses, increasing the likelihood of difficulties in wage and collective bargaining negotiations.
According to the foreign exchange market on the 28th, as of 3 p.m. that day, the won's exchange rate against the dollar has increased by 0.4 won from the previous day, recording 1376.40 won. This figure represents a decrease of about 7% from the exchange rate of 1477 won at the end of last year. The exchange rate of the won against the dollar had exceeded 1480 won at the beginning of last month, but has consistently shown a downward trend for the past month.
The recent drop in exchange rates is attributed to the increased economic uncertainty in the U.S. due to the high tariff policy of the Trump administration, coupled with growing concerns about the fiscal deficit, leading to a decline in the value of the dollar. Conversely, the won is appreciating as the likelihood grows that the U.S. will pressure South Korea to reduce its trade surplus with the United States.
If the won continues to strengthen, exporters will see a decline in profitability. The automotive sector is a representative export industry that is significantly affected by exchange rate trends. In particular, Hyundai Motor Company and Kia have seen a substantial increase in their sales proportion in the United States, having experienced poor sales in China over recent years.
According to Hyundai Motor Company's first quarter report, if the won's exchange rate drops by 5% against the dollar, the company's net profit will decrease by 159.5 billion won. Last year's business report indicated that the change in net profit for a 5% fluctuation in exchange rate was 122.2 billion won. As the proportion of sales in the U.S. has increased recently, the impact of the won's exchange rate against the dollar on performance has grown even larger.
Hyundai Motor Company and Kia each have local production plants in Alabama and Georgia, respectively. In October of last year, they completed the MetaPlant America (HMGMA), an eco-friendly vehicle dedicated factory in Georgia, producing electric vehicles locally. However, many models, including popular hybrid models in the U.S., are still manufactured domestically and exported.
The collective bargaining negotiations starting next month are also expected to encounter difficulties. In a preliminary survey conducted in February with 27,534 union members, approximately 61% of respondents indicated that it is appropriate to demand performance bonuses between 35 million won and 40 million won.
The performance bonus agreed upon last year was 500% of the base salary plus 18 million won. Considering this, it is estimated that union members received an average performance bonus of about 30 million won last year. If a performance bonus of 40 million won per person is granted this year, the total expenditure for bonuses by Hyundai Motor Company will be approximately 2.8 trillion won. Kia is also likely to demand a performance bonus at a similar level.
Since early last month, the Trump administration has been imposing a 25% tariff on all imported vehicles. Although Hyundai Motor Company and Kia recorded their highest revenue ever in the first quarter of this year, it is highly likely that their performance will turn poor starting from the second quarter, which is affected by U.S. tariffs.
An official in the completed vehicle industry noted, "Hyundai Motor Company and Kia are exposed to multiple adverse factors such as poor electric vehicle sales, U.S. tariffs, and rising exchange rates, making this one of their most challenging times. It would be advisable for the unions to make more realistic demands in the collective bargaining negotiations considering the current situation."