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[SEOUL] Standard & Poor's upgraded its credit rating for Hyundai Motor Co and sister company Kia Motors Corp on Friday by one notch to A-, citing the companies' significant cash pile as a long-term buffer in the cyclical auto industry.
Hyundai Motor came in for intense shareholder criticism last year for spending US$10 billion, jointly with Kia and another affiliate, to buy a trophy property in Seoul to build a new headquarters complex.
Both carmakers recently posted falling fourth quarter profits.
In making its upgrade, S&P cited the carmakers' cash and equivalents of 22.5 trillion won (S$27.8 billion) as of last June, excluding finance subsidiaries, and cash flow of 8.3 trillion won from operations. "We expect that both companies' stable global market positions and good profitability will likely allow them to post significant free operating cash flows," S&P said.
It expects the duo's global market share to cross 9 per cent over the next two years from 8.5 to 9 per cent in 2011-2014, adding that recently announced capacity additions in China and Mexico should help the companies to maintain their market positions in the United States and China.
Hyundai said in a statement the higher rating should cut borrowing costs for its affiliate financial companies and overseas financial businesses, allowing it to be more competitive in auto financing products that could boost sales.
Hyundai and Kia's A- rating is line with competitors Daimler AG and Nissan Motor Co, but lags Toyota Motor Corp's AA- rating.
S&P last upgraded Hyundai Motor in March 2012, from BBB to BBB+.