Kia Motors America: Lemon Aid

By Mel Duvall Print this article Print

The automaker faced a U.S. government deadline to put in a defect-reporting system. What it got: Cars with fewer glitches.

When Korean car manufacturer Kia Motors arrived on the North American automotive scene in 1995, it promised to make Japanese-quality vehicles at Korean prices. Buyers got the discount prices, but Kia failed to match the quality.

In fact, until 2002 Kia was ranked at the bottom of J.D. Power and Associates' annual initial-quality survey, which is based on responses of new vehicle owners after 90 days of ownership. In 1997, when the average North American car had 1.1 defects per vehicle, Kia had 2.75. Five years later, in 2002, Kia had improved its defect record to 2.12 defects per vehicle, but the industry average was 1.33—still a long drive away (see "Treading a New Course," p. 71).

"In general, they have managed to improve the quality of their vehicles pretty dramatically," says Chance Parker, an executive director with Westlake Village, Calif.-based J.D. Power. "But it takes time to improve public perception, and as long as they're below average, that [quality] stigma will be there."

Kia Motors America CEO Peter Butterfield has vowed to change that. Speaking at the North American International Auto Show in Detroit in January, Butterfield said the company's goal is to steer even with the industry average by 2007, and by the end of the decade to be on par with the top-ranked Japanese manufacturers.

It has been the one missing element in an otherwise great introduction story, according to Butterfield. "Just a decade ago, this company only sold 12,000 cars [in North America]," he noted. "Last year, we sold over 270,000 cars."

A key plank in the company's efforts to achieve its quality goals is a new system deployed in the fall of 2003 to track warranty claims, field reports and customer complaints across the dealership, parts and consumer affairs networks.

Like all manufacturers of vehicles sold in North America, Kia faced a deadline of Dec. 1, 2003, to create a system to report any defects, accidents or injuries involving its vehicles to the National Highway Traffic Safety Administration. The requirement was created under the Transportation Recall Enhancement, Accountability and Documentation (TREAD) Act, passed by Congress in 2000 in response to a series of fatalities involving Firestone tires. The agency's investigation determined that faulty tires, primarily on Ford Explorers, were linked to at least 271 traffic deaths and more than 700 injuries.

Kia faced a number of challenges in meeting the federal deadline. Information that was supposed to be reported had been stored in at least seven separate computer systems. Most notably, its warranty, parts, legal and consumer affairs departments operated on different, non-integrated computer platforms, such as Clarify for consumer affairs and AS/400 applications for warranties and parts. However, each system contained information that had to be reported under the federal rule. In consumer affairs, for example, if a customer called to complain about a brake problem, that information had to be recorded and reported to the government.

Getting the information right and reporting it on time is critical. Under the law, senior executives of vehicle manufacturers must sign off on the quarterly reports; if they fail to accurately report or attempt to hide defects, they risk jail time.

Kia could have created a series of workarounds to push the required information out of its various computer systems and collate it manually, but realized that would be a missed opportunity. Instead, it decided to create the equivalent of a defect early warning system. The idea, says Ed Lease, Kia's warranty administration manager, was to create a system that could identify potential problems, such as faulty air conditioning systems or brake parts, by combining incoming parts orders, warranty claims, field reports and consumer complaints to spot trends as early as possible.

"The problem with having information in silos is that you never get a complete picture," Lease says. A car owner might, for example, have his vehicle's faulty air conditioning system repaired two or three times before calling the company's consumer affairs line. By that point, the owner is probably angry, and in danger of not buying another Kia. If the problem is related to a manufacturing defect, that consumer may be just one of hundreds or thousands of frustrated owners.

"If you introduce a new car model, or a new air conditioning system, you need to be able to combine data from all sources if you want an accurate read," Lease explains. "And when you have a fast-growing company like this, staying on top of quality issues can be that much more difficult."

Infogain, a software consulting firm based in Los Gatos, Calif., was brought in during late 2002 to deal with the difficulties. Subhash Solanki, Infogain's director of solutions, says the company essentially created an engine that could go into each of Kia's reporting systems and automatically break down and categorize reports around individual components, such as steering assemblies or headlights.

Infogain used Microsoft's Data Transformation Services technology to tap into each of the applications associated with TREAD and perform a daily download. The information from each of the applications is stored in a Microsoft SQL server database. The integration involved accessing six AS/400 applications for areas such as warranty claims, parts sales, vehicle identification number master storage files, and vehicle inventories. It also set up a connection to a Clarify customer relationship management system that handles consumer complaints and compiles field reports.

These reports are created when a Kia owner encounters a stubborn problem with a vehicle. If a dealership has tried three times to fix a suspension problem, for example, and still can't find the answer, Kia may send out an engineer to investigate. The investigator will file a report in Clarify.

This article was originally published on 2005-06-10
Contributing Editor
Mel Duvall is a veteran business and technology journalist, having written for a variety of daily newspapers and magazines for 17 years. Most recently he was the Business Commerce Editor for Interactive Week, and previously served as a senior business writer for The Financial Post.

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