Kia set to rev image, sales

By Jeffry Scott

The Atlanta Journal-Constitution

Terry Laughridge remembers the early days of Kia in Georgia, when customers walked into his showroom in Blue Ridge in 1995 and he and his salesmen said silent prayers.

“We only had two cars back then and one of them didn’t run very good,” says Laughridge, who now owns three of Georgia’s 22 Kia dealerships. “If they bought that one we just hoped it didn’t break down before they got it off the lot.”

That stigma of unreliability still clung to Kia’s reputation more than a decade later when, in 2006, the Korean carmaker announced it was opening its first U.S. production plant in West Point, Ga., near the Alabama border.

Some even saw the plant as a consolation prize of sorts in the battle to bring auto plants to the Southeast. Alabama got a Mercedes plant, South Carolina a BMW plant. Georgia got Kia.

Any superficial regrets have long since been washed away. The opening of the Kia plant, which turned out its first car last week, is a huge economic bright spot as Georgia reels from the recession and housing bust.

Kia now generally gets high marks from J.D. Powers & Associates, which tracks consumer satisfaction, and Consumer Reports, along with good reviews from an automotive press that can be testy.

The effort to boost quality dates to Kia’s bankruptcy in 1997, during which it was bought by fellow South Korean carmaker Hyundai Motor Company. Both companies pushed hard to improve their quality, which was killing them in a U.S. market where they were going up against meticulously groomed and fine-tuned Toyotas and Hondas.

Hyundai has since pulled even with its Asian rivals in the eyes of many.

But the consumer perception of the Kia brand still “lags behind that reality,” Kia Motors America vice president of marketing Michael Sprague told reporters last week during a news conference in Atlanta to introduce the redesigned Sorento compact SUV, which will be made at the West Point plant.

He hopes the plant itself will help fix that perception.

“Consumers tell us that being built in the United States really helps to reinforce their confidence in the brand,” he said.

Already, Kia is outperforming the industry during the economic slump. So much that it wouldn’t be too far-fetched for Kia to embrace the advertising slogan for its redesigned Sorento, “A Departure from The Expected,” as its corporate mantra.

Kia sales are up 4.6 percent in 2009, according to Ward’s Automotive, while the U.S. industry overall was down 27.3 percent. Kia is expected to capture 3 percent of the U.S. market for the first time in its history.

In 2006, the Kia U.S. market share was 1.8 percent (No. 1 GM had about an 18 percent market share).

Last quarter’s $339 million profit was the highest in the company’s history since it was founded in 1951 as a bicycle maker.

Yet, all is not perfect.

Kia unit sales in the U.S. (which represents about one-third of global sales), were expected to be about 238,000 in 2009, which is down sharply from the high of about 305,000 sold in the U.S. in 2007.

That was to be expected in a market that has shrunk by about one third over the past two years, said Thomas Loveless, Kia Motors America vice president of sales .

“We went from a 15 [million unit] industry a couple of years ago to a 10 [million unit] industry,” said Loveless. “But we think it will get back to a 14 million unit industry, and when it does we think we can grow the company to a 5 share.”

Analysts said Kia sales have largely been spurred by the bad economy because its cars cost less across the board than Japanese and American makers’ products.

Bernard Swiecki, an analyst with the Center for Automotive Research in Ann Arbor, Mich., said Kia also benefits because its cars get good gas mileage, which may keep sales up even when the economy rebounds.

“Going forward, no one expects fuel prices to stay this low,” he said. “When they go up, that stands to benefit companies such as Kia.”

Michelle Krebs, a senior analyst for Edmunds.com, said Kia has added customer incentives to get market share. In 2002 it paid an average of $1,138 per vehicle, and this year it has paid an average of $2,936 per vehicle, and that “could backfire” and cut profits.

On the other hand, Krebs said, by opening a plant in the U.S. the way Japanese companies did years ago, it, too, can say its vehicles are American-made, still a plus with many U.S. shoppers.

Laughridge, who once worried whether his Kias would make it off the lot, says this year he expects to sell 2,000 at his dealerships in Cartersville, Athens, and Brunswick, which is about how many he sold last year.

His cars match Toyota and Honda in quality, he says.

And his sales hook just got better.

“Look, I tell customers Ford closed its plant in Georgia,” he says. “Chevrolet closed both its plants. We opened one and we’re hiring. What’s good for Georgia is good for you. In two years, you know what, I guarantee you, my sales are going to double.”