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A pivotal play for Hyundai

Times Staff Writers

Audi’s top American executives were in Arizona this week, hosting golf outings with Ronnie Lott, tippling drinks with Kate Hudson and throwing swanky parties at an exclusive nightclub, all in conjunction with the carmaker’s first Super Bowl advertisement in 17 years.

Hyundai is also advertising during the Super Bowl for the first time in years -- 19 to be precise -- to promote its new Genesis luxury sedan. Its on-the-ground Super Bowl effort? Inviting a handful of Hyundai dealers to attend the game with the corporate marketing chief.

“It’s a question of where we want to put our resources,” explained Chris Perry, vice president of marketing communications at Hyundai Motor America, based in Fountain Valley. Yet considering the money involved -- an estimated $2.7 million for each 30-second spot, and Hyundai bought two -- as well as a public miscue that made it appear that Hyundai was pulling its ads, only to recommit a few days later, Hyundai’s approach to the big game strikes an odd note at a crucial moment for the company.

The stakes couldn’t be higher for the South Korean automaker, which is trying to push an upscale image in advance of the June launch of the Genesis. For years, the company has prospered at the bargain end of the car-selling spectrum, but it is facing a slumping market for cars in general and a looming threat from Chinese automakers eager to break into the area.

“This is extremely important for Hyundai,” said George Peterson, president of industry consultant AutoPacific. “They have to move their product up in public perception. The question is: Can they position themselves as a luxury brand?”

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If they can’t, he says, the cost could be much greater than $5.4 million in airtime.

Last year, Hyundai sold 467,009 cars and sport utility vehicles in the U.S., according to AutoData, a record but well short of its target of 512,000. For 2008, the company expects to sell 500,000 vehicles, a tall order in an overall U.S. market expected to shrink, by Hyundai’s expectations, by 4%. Last month, it sold 21,452 vehicles, down 22.6% from a year earlier.

The Genesis, though not expected to be a big seller at first, is a significant part of Hyundai’s growth strategy. Since entering the U.S. in 1986, Hyundai has focused on cars priced below $20,000. Last year Hyundai had difficulty meeting dealer demand for its low-cost Accents and Elantras, but the carmaker had a surplus of Sonatas, which top out at $25,000, and it sold many into rental fleets.

The Genesis is a different animal. The company’s first rear-wheel-drive vehicle, and its first with a V8 engine under the hood, the Genesis is a 375-horsepower machine packed with the kinds of features typically associated with BMW 5-series or Mercedes E class sedans. At a price that could surpass $40,000 (Hyundai hasn’t released final figures), it will be the Korean carmaker’s most expensive vehicle ever.

If it succeeds, said Bernard Swiecki, industry analyst at the Center for Automotive Research, it will help Hyundai “round out and be a full-product-offering automaker.” Not only would the high-margin Genesis boost profit, he said, but, with inexpensive Chinese cars expected in the U.S. in as little as three years, it would also help spread growth across a wide spectrum of buyers.

Thanks to a 10-year, 100,000-mile warranty, Hyundai has succeeded in getting the word out about its much-improved quality. But persuading drivers to choose it for a luxury car is a matter of brand perception. Enter the biggest ad spend in the world.

For a company trying something new, the Super Bowl can be a great venue, said Tim Calkins, professor of marketing at Northwestern University’s Kellogg School of Management.

“If you want to change how people think about Hyundai, the first thing you have to do is get out to people and talk to them,” he said. “The Super Bowl makes sense.”

In introducing the Genesis in South Korea last month, Hyundai ran an ad that showed the car smashing into an Audi A8 sedan, a stunt intended to demonstrate how safe the Genesis is. The U.S. message is more highbrow. Shot in stark tones on a test track and a mountain road, the Genesis could easily be confused with a German luxury car.

“We’re pretty sure that Mercedes, BMW and Lexus aren’t going to like it very much,” actor Jeff Bridges intones in the voice-over.

Central to Hyundai’s message, says Jeff Goodby, co-chairman of San Francisco ad agency Goodby, Silverstein & Partners, which created the automaker’s current campaign, called Think About It, is to “emphasize the quality and integrity of the cars, not just having them be a better price.”

But Hyundai dealers worry that too much emphasis on the Genesis and not enough on value will make it harder to sell their bread-and-butter cars.

“What brought us to the dance was more economical, more affordable cars,” said Kelly Swaim, sales manager at Drew Hyundai in La Mesa.

He fears that the Genesis may follow the path of the $67,000 Volkswagen Phaeton, a luxury car introduced in the U.S. in 2004. It was far pricier than anything else in the VW lineup and, ultimately, a commercial flop.

And, though Swaim and other dealers said they were pleased with the current campaign, a recent flap over the Super Bowl ad raised warning signals.

Less than three weeks before the game, Hyundai said it was considering withdrawing the ads. A few days later, amid swirling speculation about problems with the company’s advertising agency, Hyundai backpedaled.

“Looking at how the economy had changed, it was our responsibility to do due diligence on those ads. That’s what we did,” said Hyundai’s Perry, who denied that there were differences with Goodby, Silverstein on the campaign.

As for Hyundai’s conspicuous absence at pregame festivities, the competition regards it as a missed opportunity for the company to show off its newfound luxury to the taste makers, media and celebrities swarming around University of Phoenix Stadium.

“To just run an ad is not enough,” says Audi of America’s chief marketing officer, Scott Keogh, whose ads will boost the $109,000 R8 sports car. “If you want to sell a new kind of car, it has to be a full integrated plan and philosophy for the thing.”

Perry, Hyundai’s marketing chief, remains confident.

“We’re stretching, but we’re not leaping,” he said.

ken.bensinger@latimes.com

alana.semuels@latimes.com


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