Undermined!

KIA Motors Australia (KMA) last week moved to reassure its dealers that the new factory-backed outfit remained committed to doubling sales within a few years despite the arrest last week of its parent company’s chairman on embezzlement charges.

KMA made the announcement last Wednesday following a letter to the Korean Embassy in Canberra from the Kia Australia Dealer Council’s acting chairman Marc Caton.

Mr Caton’s letter followed local Kia dealers’ concerns for Kia’s brand image in the wake of formal charges against 68-year-old Hyundai Motor group chairman Chung Mong Koo on April 28.

Prosecutors have accused Chung Mong Koo of creating slush funds and misappropriating funds from Hyundai Motor Group, which comprises the Hyundai Motor Corporation and Kia Motors.

Together, Hyundai and Kia form South Korea’s largest car manufacturer and one the world’s seventh largest.

Hyundai Motor aims to become the world’s fifth-largest auto brand by 2010 however, concerns of a leadership vacuum have developed following its chairman’s arrest.

Hyundai Motor vice-chairman Kim Dong-Jin, who received a suspended a two-year jail sentence in 2004 for playing a key role in raising a slush fund to support politicians during the 2002 presidential election, has also been questioned.

Chung Mong Koo is the eldest surviving son of the late Chung Ju-yung, who founded the Hyundai Group in 1947 (and Hyundai Motor in 1967), which was instrumental in the rebuilding of the economy after the 1950-1953 Korean War.

Prosecutors are also seeking to indict the chairman’s son and president of Kia, Chung Euisun, who is also expected to be asked whether cash was offered for political favours via a lobbyist.

Embezzlement and misappropriation of corporate funds in cases involving more than $US4.8 million (5 billion won) can carry life jail terms in South Korea.

"Kia and its dealer network have worked hard for over nine years to build the Kia brand and presence in Australia," said Mr Caton in his letter to South Korea’s ambassador to Australia.

"We are greatly concerned that negative publicity surrounding the Hyundai/Kia groups is undermining our efforts at a time of renewed focus and energy for the Kia franchise.

"Most of our dealers have just returned from Korea where they visited some of the Hyundai/Kia manufacturing and R&D facilities and learned more about their huge investments and plans for the future.

"Kia opened its wholly-owned Australian subsidiary on 1 March this year, we understand the company has some new and exciting products to release later this year and the dealers are ready for action.

"The prospects for Kia and our Australian dealer network are very good, so the sooner the investigations in Korea are resolved, the sooner we can return to our mission of growing the Kia brand and sales in Australia."A press release issued last Wednesday by KMA described the investigation as a "distraction", but chief executive officer Steve Lotter moved to reassure Kia dealers of its Australian ambitions.

"We expect these investigations in Korea to be resolved quickly and that there will be no lasting impact on Kia’s sales or brand image in Australia," he said.

Mr Lotter said plans for a mid-year release of the new Magentis family sedan were well under way, following the success of the recently released long-wheelbase Grand Carnival people-mover.

The new short-wheelbase Carnival eight-seater, facelifted versions of the Cerato small car and Sorento 4WD, and diesel-powered variants of the Sportage and Sorento SUVs are also expected to go on sale this year.

However, according to Reuters, Hyundai has postponed US production of its new Santa Fe 4WD flagship, delayed a groundbreaking ceremony for its first US plant in Georgia, and prevented Hyundai Motor from issuing its first-quarter earnings last week.

Kia reported last week that its quarterly operating profit had more than doubled, but results fell short of analysts’ estimates as a strong Korean won impacted overseas earnings.

Hyundai and Kia exports account for almost 10 per cent of total exports from South Korea, Asia’s fourth-largest economy.

Prosecutors have been reported as saying Hyundai’s apology and its chairman’s offer to donate his family’s $US1 billion stake in car-shipping affiliate Glovis to charity would not alter the investigation’s course.