New Kia boss speaks to BusinessCar
21 March 2007
New Kia boss Paul Philpott's honest appraisal of the brand's current situation is that it needs to make big improvements in the business arena - so he's wasted no time in implementing change, writes Paul Barker
"It's been a difficult start to the year," says Kia's new MD Paul Philpott reflecting on the situation he's inherited after joining the Korean brand four weeks ago. Kia reported impressive growth in recent years, but it came to a grinding halt in 2006.
"In 2003 and 2004 we achieved good growth to 30,000-plus units off the back of retail sales," he told BusinessCar at this month's Geneva motor show. "Since then retail business has fallen back to 18,000, and to maintain volume Kia increasingly targeted fleet without putting the infrastructure in place to create core fleet business - contract hire and user chooser. The targeted sectors - rental and broker business - were a quick fix." He says not only did that create medium-term profitability issues, but it impacted upon the retail business because of the quality and numbers of nearly new and used vehicles returning to the market. "Kia as a brand has to keep supply and demand in equilibrium," he says.
Last year, the manufacturer sold 35,000 units, with a 50:50 fleet to retail split. In that fleet 50% was a high content of rental and broker business. "A lot of the business we were doing is spot-buy short cycle. We'll retain a presence in rental business but not at the level of previously."
That's why, soon after joining Kia from his previous role as Toyota's commercial director, Philpott took the decision to focus on retail and core fleet, putting a stop to most of the daily rental, courtesy car and broker business that had become the company's way of maintaining volume. At the HQ end, that involves some hefty work to build a fleet team, infrastructure and business centre.
Philpott predicts that, despite pulling out of the fleet business that buoyed last year's volumes, 2007 will see a similar volume thanks to the new lower medium Ceed, but with a shift to a 65:35 retail:fleet mix. "Medium-long term growth will be delivered through retail and core fleet at the same ratio," he said.
On top of building a fleet team, infrastructure and business centre, the Korean brand is to establish 20-30 fleet specialist dealers to try and build small fleet and user chooser business in local areas. Philpott claims to know nothing of Kia's pledge 12 months ago to pour £1m into setting up a network of fleet specialist dealers - a plan lost in the management changes over the past 12 months - but promises the brand is now serious about its ambitions.
“There's a significant commitment by Kia Motors UK to better serve the fleet customer, but I don't think enough people know about us. As a brand I think that's part of our problem. We've got a range that should appeal to business.”
"There's a significant commitment by Kia Motors UK to better serve the fleet customer," he said, "but I don't think enough people know about us. As a brand I think that's part of our problem. We've got a range that should appeal to business.
"Why do we not do better in fleet? We don't provide resource or service levels to customer so we're not on their radar."
The fleet specialist dealer network will take shape in the second quarter of the year, with the Kia HQ fleet team and support network established in the third quarter. However, the long-stated desire to hit 100,000 sales in the UK across fleet and retail by 2010 now appears to be a pipe dream.
"If you look at our total sales [in 2006], we went back by 10%," said Philpott. "Within three to six months we'll develop a new business plan for Kia. We've proved we can grow, we've not proved we can sustain it." He still believes Kia can hit 100,000 units in the UK, taking it to the same level as the likes of Honda, Nissan or Citroen, but the timescale needs a rethink.
The new Ceed, Kia's attack on the UK's biggest sector, gives Kia a timely boost. "2007 is the year of the Ceed - it has a hugely important role to play for Kia and not just because it's a C-segment car," Philpott declared. "It's our first truly European car and I see it igniting new interest in Kia." The five-door launch model is already on sale, with an estate coming mid-year and a three-door before the end of the year. "2007 has to be about leveraging Ceed to build the brand," says Philpott. The Geneva motor show also saw Kia reveal a Ceed-based convertible concept car, which has an uncertain future. "Exceed is very clearly a concept for now, but as a sales and marketer the local market would love it," says Philpott. "Kia's now got more exciting products but we've not got a halo product."
The Ceed set a new standard for warranties with a seven-year offering, and the company will look at offering the same standard on new vehicles coming through, although it won't be retrospectively upgrading the warranty on models already on sale.
The big challenge for Philpott this year is to increase a consumers' spontaneous awareness figure of just 15%. "That means 85% of people don't have us on their radar," he says. "Fleet and retail are the same - they've got to find the brand attractive, and a car that meets their needs and that they're proud to have on the driveway."