Kia 2006 Annual Report Download - page 47

The plant in Slovakia (Kia Motors Slovakia, annual capacity: 300 thousand units) was completed in 2006. Mass production started from December of that year. This
plant will produce 150 thousand units including the cee’d model in 2007, and production of other models are in planning. The Slovakia plant will be at the heart of
all future success, as we feel it will be the cornerstone for us to develop a truly global management system and sustainable sales increase. Intense marketing efforts
will center on the launch of the cee’d. The image of ‘Kia in Europe’ will be passionately portrayed by publicizing the Slovakia plant, our Europe Design Center, and
though sports marketing like sponsorship of the UEFA.
Production & Utilization Rate
In 2006, global production including overseas plants totaled 1.27 million units. This was a climb of 4.5% over 2005, with an average utilization rate of 79%.
Korean plant produced 1.15 million units (including OEM) - a modest rise of 4.1% over the previous year. Assuming a production capacity of 1.5 million units, the
utilization rate was 78.4%, similar with the 2005 rate of 79.0%. The utilization rate for the majority of the year was over 80%, but fell below 60% in the third quarter,
over labor strikes related with annual wage negotiations.
Our global production target for 2007 is 1.54 million units. Korean production represents 1.245 million units of that target. Our target 2007 Korean plant utilization
rate is set at 83.0%.
•Utilization Rate (Korean plant)
CapEx
Total capital expenditures of the company amounted to ￦1,756 billion in 2006, with the ratio of tangible and intangible R & D investment to sales revenue being
4.6%.
Of the ￦1,121 billion made in domestic investments, 71% or ￦793 billion has been capitalized: ￦535 billion in tangible assets and ￦258 billion in intangible
assets. Tangible asset investments involve maintenance and investment in new model production facilities. Intangible assets are related to the cost of new model
development. While individual depreciation periods vary according to their asset classification, our average depreciation period is 15 years. Amortization of
intangible assets begins with the mass production of new models and continues for 3 years.
Tangible asset investments fell, from the 2005 amount of ￦811 billion, because plant rationalizing & remodeling that had been underway since 2003, came to an
end. Our product life cycle also dictated that we release fewer new models than previous years. This meant Kia required a relatively lower amount of investment in
new model production facilities for the year.
Overseas investment amounted to ￦635 billion: ￦250 billion in China, and ￦385 billion in Slovakia. Investment in the US plant, which began construction in
October 2006, will be regularized from 2007.
Overseas investments are provided through capital injections from our Korean headquarter and through local financing by overseas subsidiaries. In 2006, total
capital injections amounted to ￦280 billion.
* OEM production(Picanto - Donghee Automotive) included
79%
76% 78%
2004 2005 2006
2004
1,019,366
2005
1,105,431
2006
1,150,397
* OEM production(Picanto - Donghee Automotive) included
•Production (Korean plant, units)