Kia Turns to Design in a Bid to Move Upmarket

Kia Motors has an advantage over many auto companies. Its Optima sedan undercuts the list price of Toyota Motor's (TM) Camry, one of America's most popular cars, by $1,600. Yet the longtime maker of economy rides is hellbent on selling the revamped Korean car on its looks instead.

The new Optima, with a coupe-like profile, cockpit-style instrument panel, and "tiger-nose" grille, completes the overhaul of Kia's sedan lineup by Peter Schreyer, the carmaker's Frankfurt-based head of design. The model, which went on sale in South Korea as the K5 this month and will be introduced globally later this year, competes against the Camry and Honda Motor's (HMC) Accord. "It's a car that people will simply not expect from Kia," said Schreyer. "And that's exactly what we set out to do."

Kia lured the 56-year-old German in 2006 from his design post at Volkswagen (VLKAY), where he worked on the iconic Audi TT sports car. His mission: change the perception of Kia from a company known mainly for cheap cars to one known for visual appeal. Since his arrival, rising sales have fueled record profits at the Seoul-based carmaker.

"The new Optima will be the key product that makes Kia a true global player," said Cho Soo Hong, a Seoul-based analyst at Hyundai Securities, which isn't related to Kia affiliate Hyundai Motor. "This model completes the reinventing of the brand, which wasn't historically known for good sedans."

Retail sales at Kia in the first four months of this year jumped 44 percent from a year earlier. That helped the carmaker boost first-quarter profit fourfold to 398.6 billion won ($328 million). Kia's shares, traded on the Korea Stock Exchange, have soared 45 percent since Jan. 1, after tripling in 2009, when it posted a record full-year profit of $1.19 billion on a 20 percent surge in retail sales.

Eventually, Schreyer hopes Kia's design changes will allow it to charge more for its cars, boosting profitability. "Absolutely, it's very important to increase the value of the brand and the value of our cars by design," he says. "This is why we're trying so hard."

The picture was less promising four years ago, when then-President Chung Eui Sun, now vice-chairman of Hyundai Motor, was under pressure to turn the carmaker around. With aging models and a strengthening won, Kia saw profit tumble 94 percent in 2006 and its stock lose 49 percent of its value.

Chung, the son of Hyundai Motor Chairman Chung Mong Koo, says he picked Schreyer to make Kia "a design-choice brand without high pricing." Schreyer studied transportation design at the Royal College of Art in London and joined Audi in 1980. Besides the TT, he had overseen work at VW on the new Beetle, introduced in 1998.

At the time, Schreyer saw Kia as "just another Asian carmaker" without much character, he said. Still, he quickly accepted the offer to lead the company's design centers in South Korea, Germany, and California. "It's a world I'd never have seen if I'd stayed where I was," Schreyer said.

His team introduced the tiger-nose for Kia models in 2007. It's now featured on almost all its cars including the new Optima, the revamped Sorento sport-utility vehicle, the Soul crossover, and the Forte compact.

Schreyer compares the new Optima to an "Italian suit," citing its "simplistic elegance." Kia says it already has received about 14,000 orders in Korea for the redesigned sedan, which premiered at the New York International Auto Show on Apr. 1. Projected success for the model abroad will help the automaker meet a target of boosting global sales 27 percent, to 1.94 million vehicles this year.

Eric Noble, president of CarLab, an automotive consulting company in Orange, Calif., says Schreyer has taken Kia's former "fairly undistinguished" models and transformed the company into an industry leader in design.

It's still unclear whether Kia can convince customers that sharp design is the main reason to buy its cars. In Europe, a seven-year warranty introduced for all Kia models this year is a big draw for the Korean brand, said Johan Bylund, sales manager at Svenska Bil in Stockholm, one of Sweden's biggest auto retailers.

Maria Eriksson, a 34-year-old physical therapist in Stockholm, said she decided to buy a Kia Cee'd compact wagon in early May because of the unusually long warranty and its "very favorable price."

The bottom line: Long known as a maker of low-priced utilitarian cars, Kia hopes its focus on design will allow it eventually to command higher prices.

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