LOS ANGELES - The absorption of Kia Motors Corp. by Hyundai Motor Co. will affect both automakers' U.S. operations as early as next year.
The two South Korean companies had not expected to share vehicles and vehicle platforms for at least several years. But changing market conditions in South Korea have dictated that Kia and Hyundai will share a mid-sized sedan off a new Hyundai Sonata platform in America in 2001. Hyundai bought Kia earlier this year.
That means Hyundai in Korea has a difficult decision. Should it extend its 10-year, 100,000-mile powertrain warranty on the Sonata to an identical Kia product - or all Kia products for that ma tter? Otherwise, two nearly identical products would have vastly different warranties. Kia offers three-year, 36,000-mile coverage.
Finbarr O'Neill, president of Hyundai Motor America, said he would continue pushing for the extended-warranty program. But he noted that the final decision would be made in Korea.
'I am a strong advocate of the warranty program, as are many people in Korea. It would be a brave man to pull that from our success formula,' O'Ne ill said.
KIA WANTS IT, TOO
Kia's U.S. arm also is pushing for the Hyundai warranty package, said Dick Macedo, Kia Motors America senior vice president.
O'Neill said the incremental cost of the warranty is more than offset by the savings in advertising, incentive and promotions costs.
Although the upcoming sedan is designed by Hyundai, Kia gets the car first. Kia dealers in America will see the as-yet-unnamed sedan in January 2001, while Hyundai dealers will have to wait a few months after that. The cars will have similar underpinnings, powertrains and dimensions, but different sheet metal.
'Do I like the car Kia is getting? Yes. But I am also delighted by what we're getting a s well. What matters is if the product is differentiated enough to maintain our brand distinction,' O'Neill said.
FOLLOW VW'S LEAD
Hyundai and Kia want to follow the example set by Volkswagen AG, with its Seat and Skoda units. Both use similar VW platforms, with similar price positioning, yet they have distinct styling, images and driving dynamics.
'They don't have to be different products, but they have to look and feel different,' O'Neill said.
The decision to give Kia Motors America a mid-sized sedan came recently, as a substitute for not giving America a minivan. Initially, Kia was to sell the Sedona version of its home market Carnival minivan, with a 2.5-liter, V-6 engine. But that engine would have been underpowered for American tastes, so a Hyundai 3.5-liter V-6 will be used instead. The tradeoff was a lengthy extension of the development of the American version.
Before those changes could be im plemented, however, sales of the Carnival took off in Korea. That market is demanding all that can be built, so exports to the United States aren't necessary right now.
At the same time, the Kia assembly line that builds the out going Credos mid-sized sedan is crawling along. Korean sources said Kia will reconfigure the Credos line to build the Kia version of the Sonata.
Staff Correspondent Oles Gadacz in Seoul contributed to this report