Hyundai Motor posts record Oct sales, but shares fall on recall talk

SEOUL Thu Nov 1, 2012 10:59am IST

The logo of Hyundai Motor is seen on the wheel of a car at a Hyundai dealership in Seoul October 25, 2012. REUTERS/Kim Hong-Ji

The logo of Hyundai Motor is seen on the wheel of a car at a Hyundai dealership in Seoul October 25, 2012.

Credit: Reuters/Kim Hong-Ji

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SEOUL (Reuters) - Hyundai Motor Co (005380.KS) posted record monthly sales for October, but its shares tumbled on Thursday, which analysts said was sparked by market rumours that the South Korean automaker may face a recall or litigation in the United States.

Hyundai Motor said October sales rose 14 percent to 412,189 vehicles from a year earlier as it bounced back from labour strikes in South Korea while overseas production increased.

As of 0508 GMT, shares in Hyundai Motor were down 5.57 percent after earlier slumping 5.6 percent. Shares at its affiliate, Kia Motors Corp (000270.KS), were down 1.82 percent in a wider market that was down 0.52 percent.

"Today's share drop appears to be the result of unsubstantiated rumours making rounds in the market that Hyundai is set to encounter some trouble in the U.S. market," said Ahn Se-hwan, an auto sector analyst at IBK Securities.

Two Hyundai Motor executives told Reuters that they have not heard about such problems and a Hyundai spokesman said the company was investigating the rumours and did not have any immediate comment.

Shin Jung-kwan at KB Securities said there was market talk that the U.S. National Highway Traffic Safety Administration is conducting quality investigation into Hyundai, but stressed that this happens fairly regularly.

Hyundai Motor recalled some 230,000 Santa Fe SUVs for air bag issues, U.S. safety regulators said in July. Hyundai Motor was also sued for allegedly misleading consumers sensitive to high gas prices that its popular 2011 and 2012 Elantra model is more fuel-efficient than it actually is.

Shares of South Korea's biggest carmaker have fallen 15 percent since late September, mainly due to concerns that a strengthening won and tight supply of its cars may slow earnings growth in coming months.

Hyundai has not announced plans for a new plant for at least two years as it focuses on building its brand and quality issues rather than aggressively chasing market share. This has left it short of cars to sell into a recovering U.S. market where Japanese rivals have muscled back in, as well as in emerging markets.

(Additional reporting by Somang Yang; Editing by Matt Driskill and Ryan Woo)

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