(Press release provided by Moody's Investors Service)
TOKYO, May 23 - Moody's Investors Service has upgraded the senior debt ratings and issuer rating of Kia Motors Corp to Ba2 from Ba3.
The ratings had been under review for possible upgrade since February 3, 2003. The rating outlook is stable. The upgrade is based on Kia's continuing solid operating performance and improving debt coverage measures.
The rating action also reflects Kia's growing global presence - particularly in North America - its successful defense of its dominant market position in Korea, and the positive earnings impact of its improving model mix.
Kia was acquired by Hyundai Motor Co (HMC) in 1999 and became a consolidated subsidiary of HMC. Since the acquisition, Kia has posted significant growth in sales, supported by strong demand in Korea and improvements in the quality and brand image for "Kia" cars, especially in the US.
North American sales are further supported by highly attractive warranty programs in that region.
Kia displays a greater focus on recreation vehicles appealing to younger buyers than HMC, which maintains a full line-up policy. Kia and HMC expect to achieve substantial savings through until 2008, mainly by integrating R&D, platforms and parts suppliers.
Kia will continue to face operating challenges which may affect its future operating performance, such as unpredictable foreign exchange rates and potential hikes in warranty costs.
Furthermore, Moody's believes that Kia may need to consider lifting capital spending so as to raise production as demand is increasing rapidly.
However, Moody's expects the company to maintain good operating performance and cash flow generation capabilities in the intermediate term.
Moody's believes that competitive pressures on the global automobile industry are likely to continue. Nevertheless, against such a backdrop, we expect Kia's operating performance to remain sustainable, supporting its stable rating outlook.
Kia Motors Corporation, headquartered in Seoul, is Korea's second largest automobile manufacturer.