Kia Motors reported a 25% rise in quarterly earnings on Wednesday, buoyed by brisk sales of pricey recreational models and smaller warranty provisions, Reuters reported, but like parent Hyundai Motor, showed a worsening performance from the second quarter as it suffered poor sales due to weak local demand and the effects of a month-long strike.

Reuters said the final-quarter prospect looked brighter for Kia on the launch of Cerato sub-mid size sedan as well as robust foreign demand for the Sorento sport utility vehicle and Opirus large-size sedan, although looming labour unrest remains a drag.

"Kia's profit structure is improving as its efforts to enhance brand image by shifting focus to value-added models are starting to pay off," Song Sang Hun, a Hyundai Securities analyst, told Reuters.

"New model effects and rapidly growing sales in the United States and Europe will keep Kia earnings in a good shape, helping to offset sluggish local sales," Song reportedly added.

Reuters said Kia registered a net profit of 86.7 billion won ($US73.6 million) for the third quarter ended September 30, up from a profit of 69.4 billion won a year ago, but sharply down from 186.3 billion won in the previous quarter.

Smaller rival Ssangyong Motor, which makes Rexton and Korando SUVs and sells most of its vehicles at home, reported a 77% tumble in third-quarter operating profit as local demand cooled off, Reuters said.

But its net profit jumped 46% from a year ago to 97.5 billion won on a reduced tax burden, Reuters said, citing a Ssangyong filing to the stock exchange.

According to Reuters, Kia said stagnant consumption, the Korean thanksgiving holiday and strikes depressed its sales, which saw an 11.5% decline to 2.48 trillion won in the third quarter versus a year ago, while the Kia labour union joined the Hyundai union's strike in August to demand higher wages.

"Despite poor sales, higher margins from high-end car sales overseas and a deep fall in warranty expenses were behind the rise in the net profit," Kia spokesman Lee Ha Won told Reuters.

Warranty provisions in the third quarter of 2003 eased considerably to 49 billion won against a hefty 137.4 billion won a year ago, Reuters said, noting that a company official attributed the sharp decline to a stronger won which has lowered the burden for provisions which Kia has put aside in dollar terms.

The news agency said a major selling point for Kia and Hyundai cars has been their generous 60,000-mile (97,000-km) five-year bumper-to-bumper warranty and 100,000-mile 10-year coverage for engine and transmission for cars sold in the key US market while European customers get a 50,000-mile three-year, bumper-to-bumper warranty.

Auto market intelligence
from just-auto

• Auto component fitment forecasts
• OEM & tier 1 profiles & factory finder
• Analysis of 30+ auto technologies & more