Hyundai 2006 Annual Report Download - page 121

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117
HYUNDAI MOTOR COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005
Company providing Beneficiary companies Korean Won Translation into
guarantee of indebtedness (In millions) U.S. Dollars (Note 2)
(In thousands)
Kia Motors Corporation Kia Motors Slovakia 424,202 $456,327
Kia Motors (UK) Ltd. 31,632 34,028
Kia Motors Europe Gmbh 55,000 59,165
Hyundai Autonet Hyundai Hi-Tech Electronics (Tianjin) Co. Ltd. 11,155 12,000
Total 3,758,442 $4,043,077
(2) As of December 31, 2006, the outstanding balance of accounts receivable discounted with recourse amounts to 3,724,587 million
(US$4,006,656 thousand), including discounted overseas accounts receivable translated using the foreign exchange rate at December
31, 2006.
(3) The Company offered financial institutions 48 checks including one check amounting to 2,624 million (US$2,823 thousand) and 131
promissory notes including 9 checks amounting to 31,070 million (US$33,423 thousand) that were issued by the Company as collateral
to guarantee the payment of borrowings.
(4) The Company uses a customer financing system related to a long-term instalment sales system and has provided guarantees of
71,411 million (US$76,819 thousand) to the banks concerned as of December 31, 2006. These guarantees are all covered by insurance
contracts, which regulate a customer and the Company as a contractor and a beneficiary, respectively.
(5) Ongoing lawsuits
1) The Company accrues estimated product liabilities expenses and carries the products and completed operations liability insurance
(see Note 8) in order to cover the potential loss, which may occur due to the lawsuits related to its operation such as product liabilities.
The Company expects that the resolution of pending cases against the Company as of December 31, 2006 will not have any material
effect on its financial position.
2) Nine significant lawsuits that Kia Motors Corporation, one of domestic subsidiaries, is facing are in progress and the potential
payment for damages according to the result of the lawsuits is up to 7,884 million (US$8,481 thousand). Kia Motors Corporation is
involved in lawsuits, in Brazilian court, pertaining to the disputes with the Brazilian shareholders of Asia Motors Do Brazil S.A. (AMB)
and AMB, which was established as a joint venture by Asia Motors with a Brazilian investor. In December 2001, Kia Motors
Corporation brought the case to the International Court of Arbitration in International Chamber of Commerce(ICC) to settle the
disputes pursuant to the terms of contract signed at the time of the inception of the joint venture, which stipulate that in case the
business has been adversely affected by a party’s failure to comply with contract terms and other reasons, the matter should be taken
before the International Court of Arbitration for settlement and parties shall be held accountable according to the results. The case
was decided in favour of Kia Motors Corporation in the International Court of Arbitration on July 22, 2004.
In addition, Kia Motors Corporation, a shareholder of AMB, has already written off this investment of 14,057 million (US$15,122
thousand). Although the outcome of this matter is not currently predictable, management believes that the resolution of these
matters will not have material adverse effect on the operation or financial position of the company.
3) There exist other ongoing lawsuits related to subsidiaries that were not presented above; however, the Company expects there would
not be significant effects on its consolidated financial statements.