Hyundai-Kia Cut Costs as Sales Slip

Hyundai Motor Co. and affiliate Kia Motors Corp. say they will cut costs after reporting lower sales and shrinking profits in their final fiscal quarters ended March 31, Bloomberg News reports.

Neither company has revealed a target for the cuts. But Seoul-based JoongAng Ilbo says Hyundai Chairman Chung Mong-koo has ordered a 30% reduction in operating costs.

Hyundai and Kia reported in April their operating profits in January-March fell 18% and 23%, respectively, as revenue stalled. And overseas sales declined year-on-year in April and May.

The companies blame South Korea's strong currency, Russia's collapsing market and the high cost of sales incentives in the U.S. Analysts predict the companies will trim sales and marketing budgets as a short-term remedy. But they say a more fundamental problem is that both brands lack competitive products to cash in on the global craze for SUVs and crossover vehicles.