Hyundai Motor shares fell on Monday as investors worried the United States may harden its stance on car trade and on talk, already denied, that the automaker may target parts of money-losing Chrysler.
Reuters noted that Hyundai shares dipped as much as 8.4% on Monday before stabilising a little. They finished down 5.5% according to fxstreet.com.
Analysts told Reuters US president-elect Barack Obama’s focus on the importance of helping the US auto industry may have worried investors.
Obama had said earlier he opposes a 2007 free trade deal with South Korea unless it is renegotiated to grant greater access to the Asian market for US automakers and added, on Friday, that federal help for the distressed US auto industry was a “high priority”.
“Obama’s comments on the auto industry put pressure on Hyundai,” Choi Dae-sik, an analyst at HI Investment & Securities, told Reuters. “Although today’s fall looks excessive as we don’t know what exactly Obama would do.”
US politicians made fresh calls at the weekend for the Bush administration to use a recently launched US$700bn corporate bailout programme to rescue General Motors, Ford and Chrysler with desperately needed cash.
“Over the weekend we’ve had a pretty staunch show of support towards the auto industry by US law makers and this has deepened worries about where trade relations with the US are headed,” Lee Sang-hyun, analyst at Hana Daetoo Securities, told the news agency.
Hyundai had denied an earlier Reuters report it was interested in buying Jeep from Chrysler.
“Chrysler is not the main factor pushing down Hyundai’s shares today,” HI’s Choi told the news agency. “Hyundai has nothing positive to gain with a purchase of Chrysler.”
Separately, the Chosun Ilbo reported that Korean auto industry experts had said the domestic carmakers need to use Obama’s comments about imbalance in auto trade between Korea and the US as an opportunity rather than as a source of frustration.
Suh Sung-moon, an analyst at Korea Investment and Securities, told the paper the provision of $50bn to the big three US carmakers to help them maintain operations would benefit Korean rivals. If those US carmakers go bankrupt, it would compound side-effects felt by Korean automakers, which would surely face fierce trade pressure from Washington.
The Korea-US free trade agreement had not been ratified, as expected in the first half, and this is now seemed unlikely this year.
Hyundai Motor affiliate Kia will begin manufacturing vehicles at its US plant in Georgia in the second half of 2009, raising the proportion of its US-manufactured vehicles to 60% of all of its cars sold in America.
Hyundai already operates a plant in Alabama making Sonata cars and Santa Fe SUVs.
When Kia is open in Georgia, Korean automakers will be able to reduce exports to the US, reducing the impact of an FTA on them. They will also be able to employ more Americans, possibly prompting US politicians to take a more favourable view of Korean automakers, the paper said.
The report added it was possible that GM Daewoo cars sold in Korea would be reclassified as American cars. The US government currently classifies Korean cars manufactured in America as Korean-made, the paper said.