UNIVERSITI TUNKU ABDUL RAHMAN (UTAR)

FACULTY OF ACCOUNTANCY AND MANAGEMENT

MAY 2017/2018

UKFF4024 Multinational Finance

Tutorial Group: T3
Company: Hyundai vs Mazda

Name Student ID
Chua Lui Xiong 1400559
Chong Su Yi 1304508
Gladys Gaw Shu Yin 1304586
Gai Jin Vin 1400562
Lam Yin Ching 1400630
 Hyundai Motor is a Korea Multinational automaker based in Seoul,
South Korea
Founded by Chung Ju-Yung in 1947
Has 3 plant in Korea : located in Ulsan, Asan and Jeonju.
Has 6 overseas plants: U.S., India, China, Turkey, the Czech Republic
and Russia
Main production: Automobile manufacturing, Construction,
Chemicals, Electronics, Financial services, Heavy industry, and
Shipbuilding.
 Financial Performance of Hyundai
1 Percentage of Net Sales in Host Country for Hyundai
40
34 35.2 34.8
35
Percentages of Net Sales

31.42 32.1
30
25 North
19.1 America
20 18.91 18.6 17.9 18.5
14.61 15.2
15 13.8 13.3 13.4 Europe
10
5 Asia
0
2011 2012 2013 2014 2015
Year
 Inventory Turnover of Hyundai
2 10
9.59 9.59
9.5 9.44 9.45

9
Times

8.5
8.01
8

7.5

7
2011 2012 2013 2014 2015

Year
3 Debt to Equity Ratio of Hyundai
1.8 1.71
1.6 1.54
1.36 1.35 1.35
Percentage (%)

1.4
1.2
1
0.8
0.6
0.4
0.2
0
2011 2012 2013 2014 2015
Year
 Dividend Per Share
4 2.5
2.15
2
KRW (Won)

1.5 1.38

1 0.96
0.8 0.87

0.5

0
2011 2012 2013 2014 2015
Year
5 Operating Cash Flow
6,000,000
5,339,686
KRW (Million) 5,000,000
4,132,119
4,000,000

3,000,000
2,120,845
2,000,000
1,208,446 1,248,415
1,000,000

0
2011 2012 2013 2014 2015

Year
 Balance of Payment What Happen on Korea Balance
of Current Account
Balance on Current Account in -Achieve top surplus in 2015
9 -Faster fall in import than export
Korea
8 7.66 -Called Recession Type Surplus
7
Percentage of GDP

6.22 5.98
6 Reason:
5 -Low crude oil prices
4.16
4
3 Affect:
-Put upward pressure on Won
2 1.55
Currency and will negatively
1 effect on export
0
2011 2012 2013 2014 2015 Government do
Year
-Intervene in currency market
Source: The World Bank
http://data.worldbank.org/indicator/BN.CAB.XOKA.GD.ZS?locations=KR
and make additional interest cuts
 What will happen on Reason:
Hyundai

Affect the Sales Volume, The unfavorable external factors

Revenue, Operating such as strong Won against the
Profit currency of developing countries

What Hyundai company do?

To avoid the decrease on Sales, Hyundai will strengthen their brand name by
improve their car features and performances
 Balance on Current Account in German (Host) What Happen on German Balance of
9 8.57 Current Account
-Achieve top surplus in 2015
8 7.43
7.02
6.73 Reason:
Percentage of GDP

7
6.09 -Strong export sector
6
-Low crude oil prices
5
4 Government do
-Reduce the surplus by investing public
3
infrastructure, raising the wages of
2 Germany worker, and increase
1 domestic spending
0
What company do
2011 2012 2013 2014 2015
-Hyundai look good on Europe
Year
Source: The World Bank
economic and start develop high end
http://data.worldbank.org/indicator/BN.CAB.XOKA.GD.ZS?locations=DE sport car brand into German
 Mazda Motor Corporation is a Japanese multinational automaker
based in Fuchu, Japan
Founded by Jujiro Matsuda on June 16, 1920
Major Operations : North America, Europe, China
Manufacturing Operations: South Africa, Mexico, Thailand
Main Products: Passenger cars, micro-mini vehicles, buses, trucks,
sports cars
 Financial Performance of Mazda
1 Percentage of Net Sales in Host Country for Mazda
35

29.67 29.95 29.4 30.4

30
26.3
PERCENTAGE OF NET SALES

25

20 18.53 17.88
16.65
15.6
16.4
15.4
North America
14.68 14.17 14.7
15 13.92 Europe
China
10

0
2011 2012 2013 2014 2015
YEAR
2 10 9.46
Inventory Turnover of Mazda

8 7.69
7
6.5
6.16
6 5.92
TIMES

0
2011 2012 2013 2014 2015
YEAR
 Debt to Equity Ratio of Mazda
3 3.5

3.04
3 2.85
PERCENTAGE (%)

2.5 2.32

2
1.77
1.5

0.5

0
2011 2012 2013 2014
YEAR
4 12
Dividend Per Share of Mazda

10
10

8
JPY (YEN)

2
1
0 0 0
0
2011 2012 2013 2014 2015
YEAR
 Operating Cash Flow of Mazda
5 250

204.5
200

150 136.4
JPY (BILLIONS)

100

49
50

15.3
0
2011 2012 2013 2014 2015
-9.1
-50
YEAR
 Balance of Payment What happen on Japan
Balance on Current Account in Balance of Current Account
Japan -Surplus from 2011-2015
3.5 -The current account surplus
3.06
has drop dramatically from
JAPAN CURENT ACCOUNT OF GDP

3
2011-2012 (2.1% to 0.96%)
2.5 -Reason: Tsunami,
2.1
Earthquake
2

1.5
What government do
0.96 0.9
1 0.75 -Sold Yen on the markets,
0.5
weaken the Yen
-To protect economic
0 growth, to balance the
2011 2012 2013 2014 2015
YEAR surplus in BOP, encourage
Source: The World Bank
export
http://data.worldbank.org/indicator/BN.CAB.XOKA.GD.ZS?locations=JP
 Impact Increase sales revenue and Net
What does company do
Income
- Increase sales volume in
Balance of Current Account in Brazil (Host) Asian countries
0
2011 2012 2013 2014 2015
- Increase export to developed
-0.5 host country (e.g. China
BRAZIL CURRENT ACCOUNT OF GDP

-1 emerge market)
-1.5

-2 BOP in Brazil (Host)

-Brazils economy grow at rapid
-2.5
rate in 2010
-3 -2.94 -3
-Mazda increase manufacturing
-3.02
-3.5 -3.29 business in Brazil
-However, brazil face deficit in BOP
-4 on 2011 to 2015, restrict car import
-4.5 -4.3 -Mazda set up local plantation and
distributor as a joint venture with
-5
YEAR Sumitomo Corporation (Cost-
Source: The World Bank
saving)
http://data.worldbank.org/indicator/BN.CAB.XOKA.GD.ZS?locations=BR
 Exchange Rate Mazda JPY vs USD

Source: http://www.xe.com

Overall, Japanese Yen is depreciating against US Dollar.

Between 2011 and 2012, Mazda has suffered losses due to fluctuation in
exchange rates
( > 80% profit is from foreign market) .
A manufacturing plant built in Mexico ( to control foreign exchange risk )
1 against $ = 3.5 billion (2011)
1 against $ = 1.3 billion (2015)
 Exchange Rate Hyundai KRW vs USD

Source: http://www.xe.com

Overall, Korean Won is fluctuating throughout the five years.

The Group is mainly exposed to USD risk. It manages the risk by matching the inflow
and outflow of foreign currencies according to each currency and maturity based on
exchange rate forecast.
Currency forward, currency swap, and currency option are used as hedging
instruments.
 Hyundai-Korea Macroeconomic Condition

Total export $537 Billion

Total import $422 Billion (5th
largest exporter, 2015) Positive
trade balance of $115 Billion
Motor vehicles & Parts 13.1%
($69 Billion)
Reduction in import tariff (2012)
Lowest inflation rate in 2015 with
0.71%
Highest inflation rate in 2011
with 4.03 %

https://tradingeconomics.com/south-korea/gdp
South Korea averaged GDP valued $405.16 Billion from 1960 to 2016
In 2012, Hyundai contributed 12% of the total GDP
Economic slowdown in GDP Downfall of manufacturing capacity due
to Hyundai management-labor disagreement

Strike by labor union - sales decline by 19.6% in August 2013 (47,680

units)
Change of preferences, competitive among domestic and foreign
automakers 74.6% - 66.5% from 2011-2015.
Biggest labor strike in year 2016 to demand wages increase
production loss of 117,000 cars (worth 2.5 trillion won = $2.5 billion)
while stronger Korean won eroded overseas earnings
They agreed with tentative wages
 Hyundai-China Macroeconomic Condition

Total export $2.37 Trillion

Total import $1.27 Trillion
Positive trade balance of
$1.1 Trillion (Largest export
economy in the world)
Individual Income tax range
from 5-45%

https://tradingeconomics.com/china/gdp
2016 the slowest GDP growth of 6.7% - decline in manufacturing and
construction
Private sector firms accounts 90% of Chinas exports between 2010 and
2012
Developing middle class consumers growth in wealth and demand for
premium products

Country risk US and south Korea agreed to hasten Thaad battery

deployment
China accounts the biggest foreign trade for Korea (Hyundai sold
1.8 million units in 2016)
Hyundai suspended production at china factory
60% sales plunge amid anti-Korea sentiment (16.2% drop in
Hyudais overseas sales in June 2017)
 Mazda-Japans Macroeconomic Condition

Source: Fred Economic Data

Exports recovered, but private consumption and capital expenditure are
weak.
Increasing of the consumption tax rate from 8% to 10% delayed until 2019.
Grexit: trade surplus will turn to trade deficit
Changes in the Eurozone market will cause euro would be gravely struck
and its value against the yen would likely plummet.
Conducted a variety of activities during the March 2017 to become the
only one brand that can provide brightness in customers lives through
their car experience and create deep ties with customers.
Mazda pursued structural reforms leveraging its SKYACTIV TECHNOLOGY
and worked to enhance brand value by providing attractive products and
services unique to Mazda.
It changes the company into a transformation structure which is able to
respond to environmental changes, generate sustainable and stable
profits, and a steady results.
 Mazda-Russias Macroeconomic Condition

Source: Business Insider

Russias economic has been slowing recover in 2016 due to oil prices and
economic sanctions by EU.
Mining, manufacturing and agriculture added to stabilizing oil prices to
steady the economy of the worlds biggest energy exporter.
Consumption remain weak and inventory cycle exerting a small drag on
growth.
Continuing enhancing the law regarding the environmental activities and
regulatory activities.
Mazda tried to build a more solid financial base in order to response to the
drastic changes in the market, such as unforeseen market changes, changes
in market demand and exchange rate fluctuation.
With the more restriction on environmental law, Mazda tried to improve the
base technologies that determine the cars basic performance ( e.g. engine
and transmission).
Mazda aimed to enhance their brand value to provide a customer experience
that is highly correlated with their brand value (e.g. renovation for the interior
and exterior showrooms in Europe)
 Recommendation
Proton can learn the strategy from Hyundai that strengthen
their brand name to boost their sales. For example, Proton
can launch a new car with new features and performance to
attract their customers.

Since Ringgit Malaysia depreciates against US Dollar,

Proton manufacturing plant can learn from Mazda to place
their manufacturing plant abroad and offshore their
operation to avoid exchange rate risk.

Proton can learn from Mazda to develop new engines when

facing restriction on environmental law, for instance, to
enter the European Market when meeting stricter European
emission regulations.