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Annual Report 2014

Table of contents

  • Page 1
    Annual Report 2014

  • Page 2
    ... Overseas Business Performance 28 2014 New Models 30 Special Issue 32 Global Awards List Our Strengths 36 Design Management 40 Branding 42 Marketing 44 Quality Management Our Future 48 Research & Development 55 Concept Cars 56 Global R&D Network 58 Corporate Social Responsibility 60 Financial Review...

  • Page 3
    Annual Report 2014 Business Highlights Financial Highlights 2014 2013 2012 2011 2010 2014 2013 2012 2011 2010 (KRW in millions) Global Retail Sales Total Korea Overseas 2,907 465 2,442 2,746 458 2,289 2,709 481 2,228 2,478 492 1,986 2,088 483 1,605 (Unit: thousand vehicles) ...

  • Page 4
    ... exceeded 3 million units for the first time in our history, recording year-on-year sales growth of 7.6%. Kia Motors will continue to strengthen its global management through diversified efforts in overseas markets. This includes the construction of a new plant in Mexico, which is to be completed...

  • Page 5
    Annual Report 2014 Growth Global Sales Growth by Region Year-on-year change in 2014 Unit: thousand vehicles US Europe* China Korea + 8.4% + 4.3% +18.2% +1.5% 535 580 339 354 547 646 458 2013 2014 2013 2014 2013 2014 2013 2014 * Europe = EU+EFTA countries Sales of Kia Motors...

  • Page 6
    ...non-premium nameplates, as of June 2014) Kia Motors ranked 74th (with a brand value of USD 5.4 billion) in the 2014 Best Global Brands study released by Interbrand. This result represents a brand value growth of 480% since 2007. Last year, Kia rose by nine spots from its 2013 ranking, recording the...

  • Page 7
    ... make improvements to realize our goal of being green and clean. Kia Motors is working to ensure that each of its products earns the Carbon Footprint Label Certification, which certifies low-carbon products. Meanwhile, we have over 13,000 employees participating in 100 volunteer service activities...

  • Page 8
    ... 2015, Kia Motors will lay the foundation to become a leading global company by concentrating our efforts on improving product competitiveness and customer satisfaction. We will enhance our image by strengthening our development activities for eco-friendly and strategically localized cars, securing...

  • Page 9
    ...-on with more established companies in the eco-friendly car market. In order to meet rising demand for Kia cars around the world and guarantee our sustainable growth, we are fortifying our global production bases including the ongoing construction of our newest overseas plant in Monterrey, Mexico...

  • Page 10
    ... a respected global corporate citizen. Strengthen customer-oriented management Reinforce long-term growth engine Strengthen foundation for sustainable management 1. Achieve core/future technology competence 2. Innovate production efficiency 3. Elevate quality level 4. Enhance brand stature based...

  • Page 11
    ... Report 2014 Company History 2014 was Kia Motors' most successful year yet, with total global sales exceeding 3 million units and a ranking of 74th on Interbrand's Best Global Brands list. We also received numerous awards recognizing our achievements in design and quality management. The world...

  • Page 12
    ... Kia Motors: A Vibrant Experience 2,907 Global Retail Sales in 2014 (Unit: thousand vehicles) 2012 3,041 Global Plant Sales in 2014 (Unit: thousand vehicles) 2012 2,709 2013 2013 2,720 2,827 2014 2,746 2014 2,907 3,041 5.9% Year-on-year change in 2014 7.6% Year-on-year change in 2014

  • Page 13
    ... the SUV market, posting sales of 24,315 units in its first four months following introduction. As a result, Kia garnered 28% of the domestic new vehicle market in 2014. Selected as the most favored brand by customers The outlook for the domestic car market is positive for 2015. Although its growth...

  • Page 14
    ... as a brand that is preferred by customers around the world, with particularly strong growth in the U.S., Europe and China. Overseas Sales & Market Share (Unit: thousand vehicles) 2012 2,228 (3.0%) 2,289 (2.9%) 2013 2014 2,443 (3.0%) Kia Motors will focus on sales growth through localization...

  • Page 15
    ... Annual Report 2014 2014 Global Sales Growth (Year-on-Year Change) 5.9% 2014 Sales Growth by Region (Year-on-Year Change) North America Europe China Kia Motors signs US$1 billion investment agreement for establishment of manufacturing plant in Mexico. 8.4% 4.3% 18.2% 2014 Best-selling Models...

  • Page 16
    ... Sorento SUV was introduced in August 2014 to target the U.S., Chinese and European markets. Kia Motors invested KRW 450.0 billion to develop this premium midsize SUV, whose marketability and quality outshines competitor models. As a result, 23,328 units of Sorento were sold in its first four months...

  • Page 17
    ... vehicles of different brands. The Soul is popular with elderly customers in Europe and North America due to its easy ingress and egress as well as low price. Soul: Total sales surpass 1 million units The Soul is the diamond of Kia Motors' design management initiatives. KRW 190 billion was invested...

  • Page 18
    ... (Optima Hybrid) 'Plus X' Innovation Award TÃœV SÃœD Product Service Testing Institute, Germany, October 2014 Soul EV Good Design Award Chicago Athenaeum Museum of Architecture and Design, USA, December 2014 Active Lifestyle Vehicle of the Year Active Lifestyle Vehicle Program, USA, October 2014...

  • Page 19
    ... Strengths Kia Motors: Unsurpassed designs, innovative brand management 74th Global Top 100 Brands Ranking (Interbrand) 2012 US$4.1 billion 2013 US$4.8 billion 2014 US$5.4 billion 3rd 2014 IQS (Initial Quality Study) by J.D. Power and Associates (among non-premium nameplates, as of June 2014) 87...

  • Page 20
    ... these centers we have established a global design network, linking Asia, Europe and North America. developed under this strategy. We put our heart and soul into its design, with an aim to create a strong visual icon that would mesh well with our youthful brand ethos. Kia Motors has successfully...

  • Page 21
    ... Strengths Annual Report 2014 Design Awards 2014 World acclaim for Kia Motors continues as a result of the time, investment and effort that we dedicate to design management. Soul 2014 iF Product Design Award in Transportation Design category Winner of 2014 Red Dot Design Award in Product Design...

  • Page 22
    ...'s 2014 list of 100 Global Best Brands. A Different Beat: Brand essence of Kia Motors Kia Motors first established a global brand essence to the world by declaring its global brand management strategy in 2005, at which time it introduced "Exciting and Enabling" as its new brand essence. In order to...

  • Page 23
    ... fully-integrated sonic branding, a marketing strategy that reminds consumers of a specific brand through audio elements. Using TV ads and other customer contact points, we presented our brand's sonic signature, which was developed in collaboration with a world-renowned company in 2013. The sound...

  • Page 24
    ...ongoing development of strategic models specifically targeted at the Chinese market. We will sustain these results by continuously providing high quality vehicles to the Chinese market. Soul EV: Winner at the Canadian Car of the Year Awards The Soul EV was named the "Best New City Car" at the 2015...

  • Page 25
    Our Future Kia Motors: A reliable companion and partner R&D Expenses (KRW in billions) 41.5% K7 HEV's fuel economy improvement ratio as compared to gasoline models 1,270 1,241 1,027 62.6% 2012 2013 2014 Increase in mileage for Soul EV as compared to that of Ray EV (91 km  148 km)

  • Page 26
    ... our eco-friendly car lineup. By successfully promoting these key policies, Kia plans to continue securing concrete advantages in the increasingly intensifying global competition for improving fuel efficiency. Eco-friendly models consumption in the hybrid car category of the Guinness World Records...

  • Page 27
    ..., Kia Motors' diesel vehicles realize 20% to 30% higher fuel efficiency and about 20% fewer CO2 emissions than gasoline cars. Our diesel engine-equipped vehicle lineup now includes the K3 (Cerato/Forte), Pride (Rio) and Soul models. Currently, our diesel car lineup is switching to engines with...

  • Page 28
    ...response time and smooth speed changes thanks to its two clutches that operate in tandem. The CVT is currently found in the Morning (Picanto) and Ray lightweight vehicles, whose fuel efficiency is the most important purchasing factor. Kia Motors has become a global leader in technology by developing...

  • Page 29
    .... The KX3 is scheduled to be produced at our third Chinese plant and launched in 2015. GT4 Stinger: Defining the future of Kia The GT4 Stinger, a rear-wheel drive sports coupe, is the tenth concept car from our U.S. design center. Its 2.0 turbo GDI engine and 6-speed manual transmission give it...

  • Page 30
    ...the world. By establishing research institutes in the U.S, Japan, Germany, India, and China, we expect greater performance in our global management. 5 Hyundai·Kia Motors R&D Center • Location: Hwaseong, Gyeonggi-do • Size: 3,470,000 m2 • Facilities: Engineering Design Building, Design Center...

  • Page 31
    ... and their families. In line with its young and dynamic brand image, Kia also In 2012, we built a health center (the Green Light Center) in Salima, Malawi, followed by construction of a middle school (the Green Light School) in Nagashanqui, Tanzania. In 2014, we completed building middle schools...

  • Page 32
    ..., 2014 and 2013, the consolidated statements of income and comprehensive income, changes in equity and cash flows for the years then ended, and notes, comprising a summary of significant accounting policies and other explanatory information. Management's Responsibility for the Consolidated Financial...

  • Page 33
    Financial Review Annual Report 2014 KIA MOTORS CORPORATION AND SUBSIDIARIES Consolidated Statements of Financial Position As of December 31, 2014 and 2013 (KRW in millions) (KRW in millions) Note ASSETS Cash and cash equivalents Short-term financial instruments Short-term available-for-sale ...

  • Page 34
    ... Review Annual Report 2014 KIA MOTORS CORPORATION AND SUBSIDIARIES KIA MOTORS CORPORATION AND SUBSIDIARIES Consolidated Statements of Income Consolidated Statements of Comprehensive Income For the years ended December 31, 2014 and 2013 (KRW in millions except earnings per share information...

  • Page 35
    Financial Review Annual Report 2014 KIA MOTORS CORPORATION AND SUBSIDIARIES Consolidated Statements of Changes in Equity For the years ended December 31, 2014 and 2013 (KRW in millions) (KRW in millions) Attributable to owners of Parent Company Accumulated other comprehensive income (loss) 334,...

  • Page 36
    ... and operates three principal automobile production sites: the Sohari factory, the Hwasung factory and the Kwangju factory. The shares of the Parent Company have been listed on the Korea Exchange since 1973. As of December 31, 2014, the Parent Company's largest shareholder is Hyundai Motor Company...

  • Page 37
    ... year ended December 31, 2014 (KRW in millions) (d) Use of estimates and judgments The preparation of the consolidated financial statements in conformity with K-IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported...

  • Page 38
    ... new accounting policy did not have significant impact on the Company's consolidated financial statements for prior years and as of and for the year ended December 31, 2014. interests issued by the acquirer. However, any portion of the acquirer's share-based payment awards exchanged for awards held...

  • Page 39
    Financial Review Annual Report 2014 KIA MOTORS CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements December 31, 2014 and 2013 The amount of any write-down of inventories to net realizable value and all losses of inventories are recognized as an expense in the period the ...

  • Page 40
    ... reviewed at the end of each reporting date and adjusted, if appropriate. The change is accounted for as a change in an accounting estimate. (k) Borrowing costs The Company capitalizes borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset as part...

  • Page 41
    Financial Review Annual Report 2014 KIA MOTORS CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements December 31, 2014 and 2013 RESEARCH AND DEVELOPMENT Expenditures on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and ...

  • Page 42
    ... from sale of goods or the use by others of the Company assets is measured at the fair value of the consideration received or receivable, net of returns, trade discounts, volume rebates and cash incentives to the customers. Revenue from sales of vehicles, service parts and other related products is...

  • Page 43
    ...) 2013 The Company is engaged in manufacturing and sales of vehicles and parts, leasing of vehicles and rendering vehicle maintenance services. Leasing income and maintenance services are insignificant to total sales. Revenue information by products and services is not available and management...

  • Page 44
    ... 2014 2013 Marketable securities Hyundai WIA Corporation Hyundai Hysco Co., Ltd. HMC Investment Securities Co., Ltd. SeAH Besteel Corp. 13.44% 15.65% 4.90% 0.00% â,© 237,510 63,794 29,574 20 330,898 Non-marketable securities(*1) WIA Automotive Engine (Shang-dong) Company Hyundai Capital America...

  • Page 45
    ... Kia Motors Co., Ltd. Hyundai Motor Manufacturing Russia LLC Innocean Worldwide Americas, LLC Hyundai Information System North America Sewon America, Inc. Hyundai Capital America Hyundai Capital Services UK Ltd. Hyundai Capital Canada Inc. 2013 2014 Hyundai Mobis Co., Ltd. Hyundai Steel Company...

  • Page 46
    ... on investment Other capital movement Dividends received Other decrease Ending balance Company Total assets Total liabilities Sales Operating profit (loss) Net income (loss) Other comprehensive income (loss) Hyundai Mobis Co., Ltd. Hyundai Steel Company Hyundai Engineering & Construction...

  • Page 47
    ... Millennium Corporations Hyundai Motor Company China Ltd. Hyundai Powertech (Shangdong) Co., Ltd. Dongfeng Yueda Kia Motors Co., Ltd. (*) Hyundai Motor Manufacturing Russia LLC Innocean Worldwide Americas, LLC Hyundai Information System North America Sewon America, Inc. Hyundai Capital Services UK...

  • Page 48
    Financial Review Annual Report 2014 KIA MOTORS CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements December 31, 2014 and 2013 (b) Details of changes in property, plant and equipment for the year ended December 31, 2014 are summarized as follows: (KRW in millions) (f) ...

  • Page 49
    Financial Review Annual Report 2014 KIA MOTORS CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements December 31, 2014 and 2013 (d) The amount recognized in profit or loss from investment property for the years ended December 31, 2014 and 2013 are summarized as follows: (...

  • Page 50
    Financial Review Annual Report 2014 KIA MOTORS CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements December 31, 2014 and 2013 13.Other Assets Other assets as of December 31, 2014 and 2013 are summarized as follows: (KRW in millions) (b) Long-term debt Long-term debt in ...

  • Page 51
    ... Rate of future salary growth (d) The principal actuarial assumptions used related to plans in Korea as of December 31, 2014 and 2013 are summarized as follows: (KRW in millions) 2014 2013 3.53% 5.00% 4.50% 5.00% (e) Changes in present value of defined benefit obligations for the years ended...

  • Page 52
    ... Company's financial position, financial performance and cashflows. (e) In connection with long-term debt guaranteed, amounting to USD 98,333 thousand, by Hyundai Motor America, Inc. and Mobis America, Inc., Kia Motors Manufacturing Georgia, Inc. (KMMG) should pay guarantor fees calculated at a rate...

  • Page 53
    ... Review Annual Report 2014 KIA MOTORS CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements December 31, 2014 and 2013 (b) Accumulated other comprehensive income and loss as of December 31, 2014 and 2013 are summarized as follows: (KRW in millions) 22. Earnings per Share...

  • Page 54
    ... cost Accrual for other long-term employee benefits Other employee benefits Travel Communications Utilities Taxes and dues Rent Depreciation Amortization Bad debt expenses Repairs and maintenance Insurance premium Entertainment expense Maintenance fee for vehicles Supplies and stationery Information...

  • Page 55
    ... tax rate â,© 3,816,316 1,036,084 4,828,576 1,356,277 2014 2013 Foreign exchange transaction loss Foreign exchange translation loss Loss on disposal of accounts and notes receivable - trade Donation Loss on sale of property, plant and equipment Loss on sale of intangible assets Impairment loss...

  • Page 56
    Financial Review Annual Report 2014 KIA MOTORS CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements December 31, 2014 and 2013 (e) Details of changes in deferred tax assets and liabilities for the year ended December 31, 2014 are as follows: (KRW in millions) (f) Details...

  • Page 57
    ...the years ended December 31, 2014 and 2013 are summarized as follows: (KRW in millions) 2014 2013 2014 2013 Changes in inventories Raw material and merchandise consumed Employee benefits Other employee benefits Depreciation and amortization Overseas marketing and export expenses Sales promotion...

  • Page 58
    Financial Review Annual Report 2014 KIA MOTORS CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements December 31, 2014 and 2013 (a) Details of cash flows from operating for the years ended December 31, 2014 and 2013 are summarized as follows: (KRW in millions) 30.Finance ...

  • Page 59
    Financial Review Annual Report 2014 KIA MOTORS CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements December 31, 2014 and 2013 31.Risk Management of Financial Instruments (a) Credit and counterparty risk (i) Exposure to credit and counterparty risk The carrying amount of ...

  • Page 60
    ... through profit or loss Loans and receivables: Cash and cash equivalents Short-term financial instruments Account and notes receivable - trade â,© 2,478,470 3,458,889 2,419,265 514,366 3,836 456,330 â,© Available-for-sale financial assets: Short-term available-for-sale financial assets Long-term...

  • Page 61
    ... Review Annual Report 2014 KIA MOTORS CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements December 31, 2014 and 2013 The Company measured the fair value of financial instruments as follows: - The fair value of available-for-sale financial assets traded within the market...

  • Page 62
    ... Motor Company China Ltd. Dongfeng Yueda Kia Motors Co., Ltd. Hyundai Motor Manufacturing Russia LLC (iii) Financial assets subject to offsetting, enforceable master netting arrangements and similar agreements as of December 31, 2013 are as follows: (KRW in millions) Mobis Alabama, LLC Mobis Parts...

  • Page 63
    ...Kia Motors Co., Ltd. Hyundai Motor Manufacturing Russia LLC Mobis Alabama, LLC Mobis Parts America, LLC Mobis Slovakia s.r.o. Powertech America, Inc. Sewon America, Inc. Other Hyundai Glovis Co., Ltd. Hyundai WIA Corporation Hyundai Capital Services Inc. Other related companies Hyundai Motor America...

  • Page 64
    ...Kia Motors Co., Ltd. Hyundai Motor Manufacturing Russia LLC Mobis Alabama, LLC Mobis Parts America, LLC Mobis Slovakia s.r.o. Powertech America, Inc. Sewon America, Inc. Other Hyundai Glovis Co., Ltd. Hyundai WIA Corporation Hyundai Capital Services Inc. Other related companies Hyundai Motor America...

  • Page 65
    ...for functionality and convenience PRIDE (RIO) South Korea's signature subcompact model, loved in the global market for its excellent performance, reasonable price and low maintenance costs MORNING (PICANTO) South Korea's flagship city car that is fun to drive, comfortable, fuel-efficient, and safe...

  • Page 66
    ...Overseas R&D Centers Overseas Plants North America 27 North America 30 31 America Technical Center (Michigan) Kia Motors California Proving Ground Kia Motors Manufacturing Georgia Europe Europe 28 32 Europe Technical Center Kia Motors Slovakia Asia/Pacific 33 34 35 Overseas Design Centers 36...

  • Page 67
    ...Executive Director of Market Oversight at the Fair Trade Commission Doo-Hee Lee • Currently, Dean of Business School at Korea University • (Former) President of APAIE (Asia-Pacific Association for International Education) Contact Information For more information on Kia Motors, please visit kia...

  • Page 68
    Kia Motors Corporation 12 Heolleung-ro, Seocho-gu, Seoul, 137-938, Korea