Another great article coming from European press:

The sleek, mirrored facade of Kia Motor’s new 75million euro ($109million) design centre has carved out its own unique space in Frankfurt’s distinctive skyline.

In automotive circles, the city is famous for hosting Europe’s biggest motor show every other year. Now, with the arrival of Kia, the car industry’s presence has become permanent.

“The building and the location is quite a statement,” grins head designer Peter Schreyer as he looks out over the sprawling city. “It is part of our brand image positioning. It is a statement of our strong commitment to Europe.”

New rival’s arrival

The Korean car maker is here to challenge the German automotive groups on their own turf, with models designed in Europe, by Europeans, for Europeans. Some of its cars are even produced in Europe, in a recently opened factory in Zilina, Slovakia.But though Kia talks bold about the future, it is also painfully aware that reviving the marque’s image will be expensive, and it will not happen overnight. After all, it is only a decade since Kia went bankrupt, only to be rescued by Hyundai Motor, which still owns 39% of its shares.

At the time, Kia was producing cars that were vastly inferior to its current models. This created an image, which the car maker is struggling to shed.

But Mr Schreyer is convinced it is possible, not least because he feels the brand loyalty that German car makers enjoy in their home market is slowly disappearing as customers are increasingly prepared to buy models made by Asian car makers.

“We grew up with our parents driving German brands,” says Mr Schreyer, who made his name as the designer behind the iconic Audi TT sportscar.

“For the young generation [which is exposed to a growing number of Asian models] the circumstances are different.”

Gradual build-up

One of the people who helped spearhead the arrival of Asian cars in Europe is Toyota Europe’s former commercial director, Jean-Charles Lievens. Now he is getting ready to do it again, only this time as head of Kia Motors Europe.

Kia is gunning for sales of 500,000 cars per year in Europe by 2010, Mr Lievens says, a “60% faster sales growth than current trend”.

Europe will thus make up a substantial part of Kia’s global growth as the company aims to raise sales from 1.6 million cars this year to 2.5 million cars in 2010, he explains.

In Europe, Kia is planning to build its brand gradually, initially focusing on quality to build trust amongst consumers.

Its offer of a seven-year warranty and high scores in crash tests for its highly-acclaimed Ceed model are crucial in this regard, as are its plans to launch a new Ceed model with a more efficient engine that will produce 37% less emissions than current models.

“Once we’ve established these values we want to move on to fun and emotion,” Mr Lievens adds. “We want to add sportiness.”

A hint at Kia’s sportier future can be seen in its recently unveiled Kee concept.”Kia can be a bit more cheeky than the others,” says Mr Schreyer.”We want to test the product on the public, on the dealers and on the media,” adds Mr Lievens.

“Then we have to study the market potential and cost implications.”

Soaring costs

Indeed, cost implications are becoming ever important for Kia – not least since it is running such a tight ship.A sign of this has been seen in Korea, where the car maker has been hit by wildcat strikes by flexible contract workers calling for better pay and conditions.

Thus the company is facing a dilemma, at a time when, in the words of Heungkuk Securities analyst Song Sang-hoon, “the problems in the US sub-prime mortgage sector and cut throat competition in China” are holding back Kia’s and other Korean car makers’ growth.

The car company is haemorrhaging cash, as its sponsorship of tennis and football tournaments continue, along with the costs associated with the building of new factories and the development of a string of new models.

The firm made a net loss of 55billion won ($60m) in the three months to the end of September 07, against a 49billion won loss a year earlier. But the only way to eventually turn the outflow into income is to keep on spending. So although it is in the red, do not expect Kia Motors to turn off the taps anytime soon. [Source: BBC News]