Kia Borrego: Nice SUV, Tough Timing

(MoneyWatch)  Kia is sailing into a perfect storm as it launches the all-new 2009 Borrego SUV this month in the U.S. market, just in time for the SUV market to sink.

The Borrego, with a starting price of $26,995, is a midsize SUV, powered by a six-cylinder engine or an optional V-8. It's based on a traditional body-on-frame truck platform, as opposed to a "unibody" that's all one piece. That's how cars and crossovers are built. A unibody is less sturdy for towing or offroading, but offers a smoother ride on the pavement.

Borrego competitors include the Ford Explorer, Chevrolet TrailBlazer, Nissan Pathfinder, Toyota 4Runner, Honda Pilot, and the Jeep Grand Cherokee. In total, U.S. sales in that segment were about 425,000 in the first half of 2008, a steep drop of 26.3 percent from the year-ago period, according to AutoData.

In a press conference, Kia executives tried to make the best of choices that were taken regarding the Borrego four or five years ago, when the SUV market was peaking, and before $4-a-gallon gas. The trend in today's market is toward cars and crossovers, plus thrifty four-cylinder engines.

I spoke with Tom Loveless, vice president of sales for Kia Motors America, and Tim Chaney, director, marketing communications, in a question-and-answer session following a July 18 press conference. The following are edited excerpts:

BNET: You said that the Borrego will conquer buyers from other brands, but I haven't heard you say you will also keep existing Kia owners from leaving. I assume you just didn't get around to mentioning it, as opposed to having a target of 100 percent conquests, right? Loveless: Obviously we're interested in our own owner base. The Borrego gives them another place for people to migrate to. In direct-mail, we are targeting Sorento (SUV) and Sedona (minivan) owners. We have been promoting to the owner base through our owner database. We have over one million people in our database. It's definitely an opportunity for us.

BNET: The Borrego is aimed at people with a household income in the mid-$80,000 range, which you said was high compared with the rest of the Kia product range. How much higher? What does the least affluent model look like? How about the average for the brand? Chaney: It's a range. For the Rio (an entry-level car), the household income is probably half of what we talked about before (for the Borrego). The average for the brand is probably $50,000 to $60,000.

BNET: In your consumer clinics for the Borrego, people said they like the styling, and they like the fact that it has so many features. But what about "avoiders?" To borrow a term from J.D. Power and Associates, avoiders are people who don't consider your brand at all (as opposed to rejectors, another widely used term in the auto industry, for people who consider a brand but buy something else). Are they worried about quality, or is that an outdated impression? Chaney: We do have avoiders who have concerns about the Kia brand... That's why it's important to take the product out to people (and let them test-drive the Borrego). We're not going to reach everybody through TV.

Photo by Greg Jarem