A Monstrous Effort : Korean Auto Maker Kia Tackles Southland Market
The television ads feature a giant Godzilla-like creature named Gorgo stomping through downtown Tokyo as screaming residents flee the imperiled city. The message: “There’s only one thing more frightening to Japan--a well-built car for under $8,500.”
In truth, Japanese auto makers abandoned the low-priced new car market in the United States several years ago. But there’s no doubt that--despite the hyperbole--the television and billboard campaign is helping establish America’s newest import.
Since its Feb. 3 debut in Portland, Korean auto maker Kia Motors Corp. has opened 50 dealerships in the West and sold 2,600 of its compact economy cars, which sell for as low as $8,495.
Now Kia is coming to Southern California--the nation’s toughest car market--with the scheduled opening Thursday of 16 new dealerships. They cover a territory stretching from Bakersfield to Cathedral City, but are concentrated in Los Angeles and Orange counties.
The dealers--all of them already selling other brands--are eager to see if Kia will live up to its advertising, or flop like the 1961 movie “Gorgo,” in which Kia’s monster mascot originally starred.
Although new to the United States, Kia does have a track record. It sells cars under its own name in 90 countries and produces nearly 700,000 cars and trucks a year. With annual revenue of more than $4 billion last year, it ranks 333rd on Fortune’s Global 500 list and is Korea’s second-largest car maker after Hyundai Motor Corp.
The company was founded in Korea in 1944 as a metal tubing and bicycle parts manufacturer--Kia means “gear,” as in a bicycle’s toothed sprocket. It later began making bicycles, then motorcycles and heavy trucks. It began passenger car production in 1974.
In 1987, Kia contracted with Ford Motor Co. to begin manufacturing the Ford-designed Festiva economy car. That successful venture has put more than 800,000 Kia-built cars into American garages. Ford discontinued the Festiva this year, but Kia builds its replacement, the Aspire.
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Kia officials decided in 1990 to begin selling cars in the United States under their own banner and set up a small office in Irvine under the name Kia Motors America Inc. the following year.
W. Greg Warner, a former Hyundai Motor America executive, was hired as chief operating officer. He had firsthand experience with that company’s spectacular 1986 launch and the myriad problems its early sales successes caused. One of Warner’s missions has been to ensure that Kia does not repeat the Hyundai mistakes. To do that, he designed a go-slow approach.
Kia has been taking a regional approach to launching its sales network, opening dealerships in quick succession in Oregon, Las Vegas, Washington, Arizona, Utah, Colorado, Northern California and, last month, San Diego County.
Each opening has been trumpeted in a flurry of local radio, television, newspaper and billboard ads featuring the grainy image of Gorgo. On average, each of the new dealers has been selling 1.1 Kias a day.
Although Kia plans to introduce a curvy sports utility vehicle, the Sportage, in December, and a mid-sized sedan in 1995, the company is entering the U.S. market with only one model, the four-door Sephia. It typically is the third or even fourth brand sold on dealers’ lots, which helps new Kia dealers ensure profits with the line because they didn’t have to invest $1 million or more in separate showrooms. Most dealerships also haven’t had to hire new sales or service personnel.
Not everyone is enthralled with the Sephia. Most reviews give it high marks for quality at a low-to-moderate price and find the styling acceptable, though not trend-setting. But Kia is knocked for omitting air bags from its inaugural offering and for having the smallest engine in its class, which includes four-door versions of the Saturn, Ford Escort, Mazda Protege and, if one can be found, a base-priced Dodge Neon.
In its June issue, Car and Driver magazine compared nine four-door economy sedans and ranked Kia ninth, largely because of the performance-oriented publication’s dislike of the Sephia’s 88-horsepower engine and its pedestrian handling characteristics.
Still, the review says that with air conditioning, power windows, mirrors and door locks and an AM-FM-cassette stereo system, the fully-loaded Sephia GS at $12,065 “offers excellent value . . . for bargain hunters who ask, ‘How much car can I get for the least amount of money?’ ”
In Las Vegas, where Kias have been part of the Budget Rent-A-Car fleet since August, the Sephia--which comes in three trim levels--has become one of the city’s best-selling four-door automobiles.
Courtesy Kia, the lone dealer in America’s gaming capital, sold 75 of the $8,500 to $12,000 cars in February. And Courtesy didn’t start selling until the 5th of that 28-day month, said owner Harold Drezner.
There were more Sephias registered to private owners in Las Vegas in February than new four-door models of the Honda Civic, Ford Escort, Nissan Sentra or Toyota Corolla, according to data collected by independent analyst R.L. Polk & Co.
But no one really expects the car to become a phenomenal seller overnight.
Industry analysts, Kia dealers and even the dark-suited executives at Kia Motors America Inc.’s new headquarters in Irvine say the goal is to start small and grow at a moderate pace while building a solid reputation for customer service and product reliability. “That’s the reason for our existence,” said Warner, “to deliver vehicles that are the equal to the best available in the category at a significant price advantage.”
Warner is determined that his company not repeat the Hyundai experience: When that company’s subcompact Excel hit the market at under $5,000 it became an instant hit and the factory opted to make as many cars as it could sell instead of only as many as its quality control system could handle.
As a result, Hyundai set U.S. records for a new automobile franchise, selling more than 250,000 cars in its second year and almost 1 million by 1989, when the bubble burst as its overzealousness left it with a reputation as a maker of inexpensive but unreliable cars. The image has hung on although industry experts say the reliability problems have been cured.
Warner maintains, and industry specialists like J.D. Power & Associates’ competitive market analyst Tom Dukes agree, that Kia seems to have produced a good, competitive economy car that meets or exceeds the basic quality standards that have been set by the Japanese auto industry.
“I was prepared not to like it,” said Dukes, “but I was pleasantly surprised. All the fundamentals are there.”
Jeannine Saniz certainly thinks so, and while positive reviews by consultants are nice, Saniz’s opinion is more important--because she actually bought a Sephia.
The 21-year-old San Diego bank teller and her husband were about to purchase a $13,800 Geo Prizm--the Toyota Corolla clone built in Northern California and sold by Chevrolet-Geo dealers--when Kia’s advertising blitz in San Diego caught their attention.
She drove 40 minutes to a new Kia dealership in Carlsbad last month to look at Sephias and drove away in a turquoise model with air conditioning, power steering, automatic transmission and a stereo AM-FM radio and tape cassette player for just over $12,000.
For the $1,800 savings, Saniz said, she doesn’t mind not having an air bag--a safety device Kia says will arrive with its 1995 models. “We were really surprised at the quality for the price,” she said.
One item that helped clinch the sale: Kia provides a free 36-month bumper-to-bumper warranty that includes 24-hour roadside service.
Kia officials say their focus on quality control and customer satisfaction is derived from the company’s ownership structure: employees own the largest block of stock, 12%, and have a vested interest in making sure the company does well. In addition, Ford owns a 10% stake and Japan’s Mazda Motors Corp., which supplies the designs for Kia engines and transmissions, owns 8%. The rest of the company’s shares are traded on the Korean Stock Exchange.
The employee interest in the company, as well as the Mazda and Ford links, prompted Carson auto retailing magnate Don Kott to ask for a Kia franchise. Kott already sells Fords, Lincolns, Mercurys, Chryslers, Plymouths, Isuzus and heavy trucks and figures a company that is partly owned by its workers has got to be finicky about quality.
Besides, he said, “I know they build a good product. Of all the cars we’ve sold over the past 10 years, the Festiva has had the lowest incidence of repair.” Kott said he’s so sure of the long-term value of a Kia franchise that he intends to build a separate Kia showroom to anchor a six-acre expansion of his Carson auto center.
The 6-foot-4, 300-pound car dealer said there’s another thing he finds impressive about the Kia Sephia: “I fit in it and am comfortable. And that’s unlike a lot of small cars.”
Other dealers who have signed on with Kia said the company’s focus on consumer satisfaction--the name of the game in today’s car business--was a key reason for signing on.
“I have never, ever, been through as much to get a franchise as with Kia,” said Ron Dixon, owner of the dealership in Carlsbad. “They talked to my bankers, I had to show them my quality and customer satisfaction ratings from Ford and Isuzu going back three years. When they called and asked me if I would be interested in applying for a franchise, they warned me that they wouldn’t talk to anyone whose ratings weren’t better than the industry average.”
Dealer Danny McKenna said Kia--unlike other manufacturers--stressed customer satisfaction over sales volume.
McKenna, who will sell Kias at his South County Motors Volkswagen and Isuzu lot in Huntington Beach, also owns McKenna Volkswagen, Porsche, Audi and BMW in Norwalk.
“With all the others, the first concern is unit sales--how many cars I can move. They all care about customer satisfaction, but sales is on top of the list,” he said. “With Kia, the very first thing we discussed was customer service.”
Kia Motors America
* Founded: 1991
* Headquarters: Irvine
* Chief operating officer: W. Greg Warner
* Employees: 70
* Products: Manufactures Ford Aspire. Its Sephia sedan, introduced Feb. 3, is its first entry into the U.S. automobile market. Will introduce Sportage, a sports-utility vehicle, this fall.
* Dealers: 50 in 11 Western states. By end of 1994, 100 more will open throughout the South and Southeast.
Southern California dealers:
* Two in Orange County (Huntington Beach and Irvine)
* Eight in Los Angeles County
* Two in Ventura County
* One in San Bernardino County
* Parent company: Kia Motors Corp., Korea
Source: Kia Motors America Inc.; Researched by JANICE L. JONES / Los Angeles Times
The Sephia Debuts
* Type: Front-engine, front-wheel-drive, compact sedan
* Cost: Base model Sephia RS sells for $8,495. The LS is $9,295 and top-of-the-line GS is $10,195
* Engine: Electronically fuel-injected, 1.6-liter, 16-valve, in-line four-cylinder engine with 88 horsepower
* Fuel consumption: Manual five-speed overdrive transmission gets 28 m.p.g. in the city, 33 on the highway. Four-speed automatic gets 25 city, 31 highway.
* Dimensions: 98.4-inch wheelbase; overall length is 170.7.
* Curb weight: Manual transmission model is 2,339 to 2,405 pounds. Automatic is 2,407 to 2,474 pounds.
* Standard features: 60/40 split-folding rear seat, remote fuel and trunk lid releases, dual outside mirrors, low-fuel warning lamp, child safety locks, front door map pockets, passenger-assist grips, rear- and front-window defoggers, AM-FM radio with dual speakers
* Options: Automatic transmission, air conditioning, power steering, radio-cassette player, halogen headlights, upgraded interior and exterior packages; GS model has cruise control and alloy wheels.
Source: Kia Motors America Inc.; Researched by JANICE L. JONES / Los Angeles Times
