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Money News

Hyundai Motor shares dive after engine woes prompt third-quarter profit warning

FILE PHOTO: The logo of Hyundai Motor is seen at its dealership in Seoul, South Korea, April 26, 2017. REUTERS/Kim Hong-Ji

SEOUL (Reuters) - Shares in South Korean automaker Hyundai Motor Co 005380.KS and affiliate Kia Motors Corp 000270.KS tumbled as much as 6% on Tuesday after warning third-quarter earnings would be hit by a further $3 billion in charges related to engine problems.

Hyundai and Kia said quality-related costs of a combined 3.36 trillion won ($2.95 billion) related to the years-long quality problem that has tarnished their credibility, taking the total costs to nearly $5 billion.

“The amount of provisions Hyundai and Kia are declaring is getting bigger each year passed and that is worrisome,” said Kevin Yoo, an analyst at eBEST Investment & Securities.

Analysts said Hyundai will inevitably swing to loss in the third quarter, despite a stellar performance in the U.S. market with its new lines of vehicles.

“For the first time, Hyundai said other engines that have not been mentioned previously are now included in provisions, possibly suggesting that more cost issues will continue after all,” said Yoo.

The two automakers are expected to release detailed earnings next Monday.

Shares of Hyundai and Kia were down 3.3% and 3.4%, respectively, compared to the broader KOSPI market .KS11 was trading up 0.2% as of 1225 GMT.

Reporting by Heekyong Yang, Hyunjoo Jin and Joyce Lee; Editing by Shri Navaratnam and Lincoln Feast

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