A Monstrous Effort : Korean Auto Maker Kia Tackles the L.A. Market
The television ads feature a 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 to establish America’s newest import line, South Korean auto maker Kia Motors Corp.
Since its Feb. 3 premiere in Portland, Ore., Kia has opened 50 dealerships in the West and sold 2,600 of its compact economy cars, which are priced as low as $8,495.
Now Kia is coming to greater Los Angeles--the nation’s toughest car market--with the scheduled opening Thursday of 16 dealerships that cover a territory stretching from Bakersfield to Cathedral City but are concentrated in Los Angeles and Orange counties.
The dealers, all of which already sell other brands, are anxious 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 has a track record. It sells cars under its own name in 90 countries and produces nearly 700,000 cars and trucks a year. With revenue of more than $4 billion last year, it ranks 333rd on Fortune’s Global 500 list and is South Korea’s second-largest car maker, after Hyundai Motor Corp.
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. Kia also builds the Ford Aspire, which replaced the Festiva this year.
A former Hyundai Motor America executive, W. Greg Warner, is chief operating officer of Kia’s U.S. sales operation, which is headquartered in Irvine. Intimately familiar with Hyundai’s spectacular 1986 launch--and the myriad problems its early sales successes caused--Warner is on a mission to ensure that Kia does not repeat Hyundai’s mistakes.
To do that, he designed a go-slow approach.
Kia first is seeking a regional base, opening dealerships in quick succession in Oregon, Nevada, Washington, Arizona, Utah, Colorado, Northern California and, last month, San Diego County.
The company is entering the U.S. market with only one model, the four-door Sephia, though Kia plans to introduce a sport utility vehicle in December and a mid-sized sedan next year.
And typically, it is the third or even fourth brand on its dealers’ lots, which means Kia dealers don’t need to make big investments in separate showrooms.
Most reviews give the Sephia high marks for quality at a low to moderate price and find the styling acceptable, though not trend-setting. But Kia gets knocked for omitting air bags 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 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 the Nevada gaming capital, sold 75 of the $8,500-$12,000 cars in just 23 days of February, according to owner Harold Drezner. There were more Sephias registered to private owners in Las Vegas that month than new four-door Honda Civics, Ford Escorts, Nissan Sentras or Toyota Corollas, 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 headquarters say the goal is to start small and grow at a moderate pace while building a solid reputation for customer service and product reliability.
Warner is determined that his company not repeat Hyundai’s experience. When that company’s subcompact Excel hit the market at less than $5,000, it was an instant hit. The factory opted to make as many cars as it could sell instead of the number 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 a million by 1989. But then the bubble burst; its overzealousness left Hyundai with a reputation as a maker of inexpensive but unreliable cars. The image has hung on, though industry experts say the reliability problems have been cured.
Warner says Kia has produced a competitive economy car that meets or exceeds the basic quality standards set by the Japanese auto industry. Industry specialists such as Tom Dukes, competitive market analyst at J.D. Power & Associates, agree.
“I was prepared not to like it,” Dukes said, “but I was pleasantly surprised. All the fundamentals are there.”
Jeannine Saniz certainly thinks so. And while positive reviews from 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--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 an AM-FM radio and 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 36-month bumper-to-bumper warranty that includes 24-hour roadside service.
Kia’s employees own the largest block of the company’s stock, at 12%; 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 stake, as well as the Mazda and Ford links, are reasons that Carson auto retailing magnate Don Kott sought a Kia franchise. Kott already sells Fords, Lincolns, Mercurys, Chryslers, Plymouths, Isuzus and heavy trucks.
“I know they build a good product,” Kott said. “Of all the cars we’ve sold over the past 10 years, the Festiva has had the lowest incidence of repair.”
The 6-foot-4, 300-pound car dealer said there’s another thing he likes about the Sephia: “I fit in it and am comfortable. And that’s unlike a lot of small cars.”
New Kia on the Block
Though it is virtually unknown in the United States, South Korea’s Kia Motors Corp. sells vehicles in 90 other countries. Car and light truck production figures for 1993 in major markets worldwide, in millions of units:
General Motors: 6.44 Ford Motor Co.: 5.60 Toyota Motor Corp.: 4.33 Nissan Motor Co.: 3.23 Volkswagen AG: 2.35 Chrysler Corp.: 2.28 Honda Motor Co.: 1.89 Peugeot-Citroen PSA: 1.66 Mitsubishi Motors Corp.: 1.39 Renault SA: 1.39 Mazda Motor Corp.: 1.34 Fiat Group: 1.17 Hyundai Motor Co.: 0.87 Kia Motors Corp.: 0.59 Daewoo Motor Co.: 0.20
Source: AUTOFACTS Inc. based in West Chester, Penn.
Researched by ADAM S. BAUMAN / Los Angeles Times
