The symbolism is impossible to miss: General Motors, the world's biggest automaker, is borrowing marketing strategy from Korean upstart Hyundai.
CEO Rick Wagoner's announcement that GM is increasing its powertrain warranty to five years or 100,000 miles on all 2007 models is intended to boost the automaker's image and sales, just as most analysts foresee a slowdown in the car market that could last through 2006 or longer. But it's also a startling acknowledgment that GM has lost key turf not just to relentless competitors like Toyota and Honda but also to inexpensive imports that not long ago were the butt of automotive industry ridicule.
Hyundai entered the U.S. market in the 1980s with low-budget brands meant to offer a new-car alternative to people who otherwise could afford only a used car. Quality was poor, however. Sales were so meager that the company seemed poised to pull out of the U.S. market in the 1990s.
Instead, the company's Korean executives made a concerted effort to raise the bar for Hyundai and its sister brand Kia. They instituted lots of manufacturing reforms to improve quality. But that takes a long time for consumers to notice, so they also began to offer the best warranty in the business: 10 years or 100,000 miles.
The strategy got buyers in the door. And quality did improve — so much so that current models like the Hyundai Accent and Azera and the Kia Sportage are beginning to poach GM's core buyers: middle-income Americans looking for good value.
Read Article