Hyundai Woos Buyers With Warranty Changes

Hyundai Motor Co., South Korea’s largest auto maker, said it will offer one of the longest warranty packages in the industry to counter its reputation for poor quality and boost its U.S. sales.

All 1999 Hyundai models will be covered by a five-year, 60,000-mile “bumper-to-bumper” limited warranty and a 10-year, 100,000-mile pledge on the powertrain. Hyundai extended its 24-hour roadside assistance program to five years from three years.

In the first eight months of the year, Hyundai’s U.S. sales fell to 64,079 units, 7.6% below sales in the year-earlier period.

The maker of inexpensive cars, whose U.S. operations are based in Fountain Valley, faces more competition because of a glut of factory-certified used cars and the entry of other Asian auto makers that aren’t saddled with a reputation for quality problems. South Korean auto maker Daewoo Motor Co. began selling its cars in the U.S. this month.

“It’s a defensive posture,” said Lincoln Merrihew, an analyst with J.D. Power & Associates. “Any time a new auto maker moves directly in your turf, the market gets crowded and the stakes go up.”

Daewoo, South Korea’s second-largest auto maker, offers a three-year, 36,000-mile “bumper-to-bumper” warranty, the industry standard. It offers the similar subcompact, compact and mid-size car models as Hyundai, also priced under $20,000.

While the most comprehensive auto warranties are often offered on luxury automobiles, owners who can afford the vehicles often have more income to spend on repairs, Merrihew said.

“Hyundai is essentially promising that its cars will run and maintenance will cost the owner a very limited amount, which is much more important among price-sensitive customers,” he said.

While Hyundai said it has “unshakable confidence” that its cars have improved, it still ranks near the bottom of the annual J.D. Powers initial quality survey, which is watched widely in the industry.

The auto maker got off to a promising start when it entered the U.S. market with its subcompact Excel 12 years ago. Sales peaked at 261,782 in 1988, then mechanical problems hit because the Korea-built cars weren’t tailored for U.S. driving conditions. Sales tumbled to 137,448 in 1990 and have remained in the 100,000 range since.

Korean auto makers Hyundai, Daewoo and Kia Motors Corp. are focusing their sales efforts on the U.S. because their home market collapsed amid the deepest recession in more than four decades.