A STATEMENT BY MANAGING DIRECTOR DOUG CROKER

CONTRARY to predictions made by some media commentators, there is no prospect of any price falls for imported Korean cars. In fact, the opposite is true: we are facing strong pressure to increase prices.

Hyundai Automotive buys its cars in US dollars, not won (the won is not a freely traded currency). Over the past 12 months, the Australian dollar has fallen markedly against the US dollar. A year ago (December 2, 1996), the Australian dollar hit a high of 82 US cents; at the time of writing, it is buying just 67.6 US cents _ a decline of 17.5 per cent. This factor alone adds about \$3,500 to the cost of a \$1 3,990 car.

Yes, the won is also weaker against the US dollar, but that is not reflected in the landed cost of our cars. Hyundai Motor Company (HMC), like all major Korean companies, has borrowed funds in US dollars to support its extensive manufacturing operations. Repayments become more expensive as the won falls against the US dollar.

Korea imports all of its natural resources. Due to the weakness of the won, companies such as HMC are facing higher import bills and therefore higher costs for its cars.

Inside Korea, the IMF's strong call for effective restructuring will send a shockwave through the Korean economy. Economic growth is likely to be halved next year to three per cent, increasing unemployment. Government spending must be cut by 10 per cent, leading to tax rises and a reduction in development and infrastructure investment.

Demand for motor vehicles is falling as people put off purchases in anticipation of tough times related to the IMF bail-out. The auto industry is already saddled with over-supply and therefore must reduce production. Given that auto companies have heavy fixed costs, it is likely that the cost per car will increase.

As a result of all these factors, we -- like all importers -- will be under considerable pressure to lift prices unless the Australian dollar recovers substantially against the US dollar by the end of the year. The well-being of the Australian dollar against the US currency will ultimately determine the pricing of Hyundai vehicles.

However, I should stress that Hyundai cars in Australia will always represent the best value for money. That is our commitment.

To continue meeting this commitment, we are reviewing our internal organisation to make it more cost effective so that we can pass the benefits to our Australian consumers.