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Kia moves to change its image, hamsters and all

To most Americans, at least to those who are aware of the brand, Kia is still associated with the cheap-and-cheerful products. That's an image the automaker is out to transform.
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The 2011 Kia Optima. With a new design director friom Audi, Kia is trying to transform its image from cheap-and-cheerful to trendy.STAN HONDA / AFP - Getty Images

As a valet pulls up in front of the upscale Chops restaurant in Atlanta’s fashionable Buckhead neighborhood, a middle-aged businessman takes the keys and sheepishly looks around. “It’s only a rental car,” he says, as if the 2010 Kia Optima he’s driving is a mark of shame.

He’s not alone, admitted Ralph Tjoa, the product planning manager on the 2011 version of the Korean carmaker’s midsize sedan. “That’s the attitude we have to overcome.”

The smaller and lesser-known sibling of Korea’s main automotive manufacturer, Hyundai Motors, Kia was founded in 1944 as a bicycle parts and steel tubing maker, only entering the car business in 1973. Its products have been sold in the U.S. market for decades — though in its early years, only through its one-time American affiliate, Ford Motor Co., which rebadged entry-level offerings under nameplates like the Ford Aspire.

To most Americans, at least to those who are aware of the brand, Kia is still associated with the cheap-and-cheerful products that long dominated its lineup after it introduced a U.S. dealer network of its own in 1994. That’s an image the maker is out to transform, and Tjoa and his team are in the point position as they prepare the launch of the ’11 Optima.

Unveiled at the New York International Auto Show earlier this year, the Optima immediately earned kudos for its elegant and timeless design, which Kia’s new styling chief, Peter Schreyer – the former design director at influential Audi AG – has likened to “a well-tailored Italian suit.”

Schreyer’s hiring itself made headlines. Kia touted it as proof of its intent to become both a styling leader and a more up-market manufacturer.

Nonetheless, it won’t be an easy transformation, admitted the maker’s U.S. sales chief, Tom Loveless. Part of the challenge, he said, is that long-standing image as a maker of products sold only on price. There’s also the reality that relatively few Americans even know the Kia brand. Then again, said the executive, “We suffer from no perception, rather than a negative perception” among the new customers Kia hopes to reach.

The company is already making some strides, he pointed out, during a media preview of the new Optima. Sales for the brand are up 16.3 percent for the year, a bit ahead of the industry overall. But the real measure of success, Loveless said, is “profitable retail market share growth.” And there, Kia is running well ahead of almost anyone else in the industry, except for fast-expanding Subaru.

For the calendar-year-to-date, the Korean maker is at 16.3 percent, a 0.2 point gain from 2009. More significantly, that’s up from just 2.1 percent in 2008. And Kia is gaining ground in regions of the country where it was never a particular powerhouse. This year, share has jumped 88 percent in the Northeast, for example, and 39 percent in California and other parts of the West.

Credit goes to a wide range of factors, including the maker’s latest-generation compact crossover, the Sorento, which Kia is building at its first North American assembly plant, a sprawling facility in West Point, Ga.

But perhaps nothing has done more to put the brand on the map than its out-of-the-box Soul crossover and the hip-hopping hamsters that serve as its, er, spokesrodents. The ad campaign, which contrasts the decidedly different Soul to what it portrays as the hamster cages most folks drive, has won a variety of awards, including AC Neilsen’s Automotive Ad of the Year.

“For the longest time, Kia had no image,” said Jim Hall, of Detroit’s 2953 Analytics. That’s beginning to change, however, and it’s a mix of product and savvy selling that is working to the Korean maker’s advantage, he contended. “This is the decade of marketing. You can have the strongest product in the world, but if you can’t market it, you’ll get lost in the crowd.”

Kia officials have yet to reveal their marketing plans for the new Optima, other than to stress that it won’t rely on hamsters, but they contend they have a solid product to work with. A preliminary drive of the new Optima reveals a well-mannered sedan with a decidedly sporty feel, a more performance-oriented version of the Hyundai Sonata with which it shares much of its underpinnings.

Hyundai took a controlling interest in Kia in 1997 following the collapse of the Korean economy and the smaller maker’s subsequent bankruptcy. Though Hyundai has provided significant resources, it hasn’t always been a smooth alliance as Kia was pushed to adopt a product strategy that aligns more with that of its bigger sibling.

The Soul was critical, according to observers to show potential buyers — indeed, to assure corporate management — that Kia could strike out on a different course while still benefiting from the necessary economies of scale that come from commonizing underlying product platforms.

One thing Hyundai and Kia long had in common was a poor record on quality and customer satisfaction. But the bigger maker has been making significant strides in recent years, directly improving quality and boosting customer perception with moves like the introduction of its 10-year warranty program.

Kia has copied the warranty but hasn’t been able to match the payoff with consumer perception, Loveless admitted. The maker scored well-below-average in the most recent J.D. Power and Associates Initial Quality Survey, and hasn’t done much better in various customer satisfaction studies.

On Friday, Kia said it had begun a recall of around 56,000 Soul and Sorento vehicles sold in the U.S. and South Korea due to defective wiring harnesses that could cause fires.

“I’m as perplexed as they are about” the quality issues, said analyst George Peterson, of AutoPacific, Inc. He suggested it may be, at least partly, the result of “selling to motorists motivated solely by price, who tend to be very critical of what they’re driving.”

Whatever the reason, a tour of the new Kia assembly plant reveals signs everywhere emphasizing the push for higher quality. The move up-market could help too, if new products, like Optima, draw in a different class of buyer.

Kia has come a long way since the days of building cars for foreign makers like Ford. It still has plenty of challenges ahead, but there’s reason for it to be optimistic about the opportunities created by products like Optima.