Figuring that what's done wonders for big brother will be good for little brother too, Irvine-based Kia Motors America today will launch its version of the auto industry's longest warranty--a carbon copy of the 10-year, 100,000-mile coverage offered by Hyundai Motor America.
Providing the long-term warranty is an effort by the South Korean auto importer to assure potential customers that the quality of its vehicles has improved dramatically since they were introduced in the U.S. in 1994.
Kia Motors America executives could not be reached for comment, but several insiders confirmed that the company, whose parent Kia Motors Corp. was acquired by Hyundai Motor Co. in South Korea last year, will begin providing a warranty identical to Hyundai's for all 2000 model year and later cars and sport-utility vehicles sold in the U.S. as of the start of business today.
"We are looking forward to it," said Peter Chi, a sales manager at Garden Grove Kia. He said executives at the dealership were told of the new warranty program last week.
"After Hyundai did it, their sales grew. So we are probably going to be doing better too," Chi said. "Most consumers worry about powertrain reliability, and it affects resale value. So the longer warranty will help."
Kia's low-price vehicles--the company sells the Sephia four-door sedan and Sportage SUV and has just launched the Spectra hatchback sedan--typically place at or near the bottom of initial-quality surveys of new-car buyers. And though most industry watchers agree that the problems being measured by those surveys are fairly benign--the days of exploding engines and grinding gears are gone--placing last still creates a terrible image problem.
Kia sales through June 30 are up 14.7% over the first half of 1999, but that's a slowdown from past years' performances and Kia doesn't want to slip into negative numbers, as Hyundai once did.
Hyundai had severe quality problems of its own in the late 1980s and seemed unable to improve its image with consumers even though critics started praising its cars again a few years ago.
As a result, Hyundai sales were tumbling until last year, when the company decided to put its money on the line along with its reputation.
In September 1998, Fountain Valley-based Hyundai Motor America launched the industry's most generous warranty program: bumper-to-bumper coverage and free roadside assistance for five years or 60,000 miles, with coverage of the powertrain components--engine and transmission--extended to 10 years and 100,000 miles.
Since then, Hyundai sales in the U.S. have soared by more than 70% and the company has been able to cut back dramatically on costly price discounting and incentive programs.