O'Neill: Hyundai and Kia brands will diverge

Finbarr O'Neill became Hyundai Motor America's CEO in 1998. Since his appointment, the company's product line has added a sport-utility and a luxury car, Hyundai's product quality has improved and sales are on pace to more than triple by the end of 2001. O'Neill discussed Hyundai's future with Staff Reporter Joe Kohn at Hyundai's headquarters in Fountain Valley, Calif.

As sister companies, how are Hyundai and Kia going to position themselves? Will Hyundai become the higher-scale brand, while Kia becomes the entry-level brand? Or will Hyundai always have an entry-level vehicle?

The brands will diverge. Naturally, there's some overlap at this time. Specifically, it will take time for the brands to diverge and to develop their brand personality. At this time, we have no plans to abandon the entry-level segment. We have a next generation Accent as part of our product plan.

You've spent much of your own energy focusing on dealers. As your product line has expanded, what kinds of initiatives have you taken to assure proper attention from your dealers?

We make an effort to go out and talk to our dealers. Instead of going out and shooting the breeze, we talk about business and reflect that back in our decision-making process. Dealers are no different than ourselves. They want to have a plan. They want to work the plan. They don't need to have a manufacturer who's flipping in and out of marketing programs, changing logos and changing incentives every month.

Since you implemented the 100,000-mile limited powertrain warranty, sales of Hyundai vehicles have grown steadily. Will the 100,000-mile warranty be around forever?

We review the warranty regularly. The warranty

really was a tangible statement to the outside of what we knew internally: Our quality had gone way up, and we thought our styling was competitive. But no one was coming to the showroom, so it helped get Hyundai on people's shopping list.

Our warranty costs have been down substantially year after year. Of course, there's an incremental cost, because we've extended the warranty. Taking into consideration that our quality has improved tremendously and taking into consideration other alternatives, such as increased rebates and increased marketing spending, it's our belief that the cost of the warranty is substantially less than other incremental costs of a marketing nature.

Since the powertrain warranty lasts 10 years, and older cars are more likely to have problems, what has Hyundai set aside to cover warranty claims for older cars?

We provided conservatively in our (warranty) costs when we established our pricing, because you only get to sell the car once. Even considering the conservative allowances we made, the costs are running below what the estimates were, and we're making money selling our cars.

Hyundai Motors America and Kia Motors America are looking to build a joint design center in Irvine, Calif. Is the purpose of this to infuse more American-based design input into Hyundai vehicles sold in the United States?

Yes. The company is expanding their company along those lines. The Santa Fe is a product that was originated out of the California design studio because, quite properly, it was seen as a product that would appeal mostly to the American market. It's quite clear that the company, over time, will continue to build up its American-based design capabilities as it has European-based design capabilities and Japan-based design capabilities. The expansion of design capacity here and the discussions regarding the proposed Irvine facility are concrete evidence of that.

How much of a voice does Hyundai Motors America have in what products it receives from the parent company?

The ability to have input is in direct proportion to our sales. It's much better than it was three years ago. To the extent that we can present a volume potential that is very profitable to the parent company, then, out of necessity, they're going to listen to us. And they have.

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