The document provides information about Kia Motors in Brazil, including: - Brazil has a population of 186.5 million people concentrated in coastal and southeast regions. - The average vehicle age is 9.4 years and vehicles travel an average of 22,000 km per year. - Main forms of transportation include bus, car, subway and train, with buses and cars being most popular. - Kia Motors Brazil currently offers several models including the Cerato, Carnival, Magentis, Opirus, Picanto, Sportage and Sorento.

1. SERVICE CONFERENCE 2006 ORLANDO, FL, USA JULY, 2006 KIA MOTORS DO BRASIL QUALITY CORE MEETING José Alli Essmael Filho, Technical Manager

2. Brasil – General Information Population : 186.500.000 inhabitant Total Length : 4,394 Km (North to South) 4,319 Km (East to West) Total Area : 8,5 million sq km Language : Portuguese Capital : Brasília - DF Federation : 5 regions, 27 states

3. Brasil – Fleet Information Average Vehicle Age : 9.4 years (similar to USA) Average Vehicle Mileage a year : 22,000 Km National Fleet : 23 million (2005)

4. Brasil – Transportation Inland transportation (intercities) By train: insignificant By plane: still expensive and inaccessible to most people By river: insignificant By bus: cheap and efficient, most popular transport vehicle By car: widely used but quite expensive due to fuel and toll fees City transportation By train: important in São Paulo city and others major cities By subway: important, modern and efficient in São Paulo city and others major cities, but not sufficient By bus: main transportation vehicle By car: most popular, accessible to many; causes huge traffic jams in big cities (over 1 million people)

5. Brasil – Demografic distribution Population : over 186 million Major part of population are concentrated in coastal and South and Southeast Regions 50% of total population lives in São Paulo and neighbour states

6. Brasil – Dealers Distribution 44 Independent Dealers

7. Brasil – Vehicles Line-up Since 2006 Cerato (1.6 GSL and 2.0 GSL) Launch on July/2006 New Carnival (3.8 GSL) Launch on July/2006 New Magentis (2.0 GSL and 2.7 GSL) Since 2005 Opirus (3.5 GSL) Launch on Oct/2006 Picanto (1.1 GSL) From 1999 to 2005 Old Carnival (2.5 GSL and 2.9 DSL) Since 2005 New Sportage (2.0 GSL and 2.7 GSL) Since 2004 Sorento (2.5 DSL and 3.5 DSL) Current K2700 Up to 2005 Pregio

8. Brasil – Climatic Features Cold winter, Nice summer Hot summer, Dry, No winter Hot summer, High humidity No winter Moderate weather

9. Effects: Brasil – Climatic Features Engine overheating (Pregio, Old Sportage) Hot Region All Vehicles – Battery problems Sorento Diesel – Engine hesitation due the fuel filter clogged Cold Region

10. Brasil – Road Condition Belgian roads – found in some streets yet Repaired Asphalt – common situation in several streets

11. Brasil – Road Condition Repaired and cracked Asphalt – common situation on several streets Speed bumpers – widely used in all cities

12. Brasil – Road Condition Though most streets of the main cities are paved, repair spots to fix holes are common situation. Cracks due to bad quality asphalt or uneven pavement after asphalt repair are also part of Brazilian streets scenary. Effect: Noise and vibration felt while driving under low speed. Main vehicles affected: Magentis MG / Sportage KM / Sorento Belgian road; repaired or cracked asphalt; uneven asphalt .

13. Brasil – Fuel Petrobras – Governmental company responsible for exploration and refine of crude petroleum. By law only Petrobras can explore petroleum in Brasil. In 2006 Brasil became self-sufficient in petroleum volume. Petrobras is pioneer in deep water exploration technology and dedicate to research of natural fuels such as Alcohol and Biodiesel. P50 - Plataform

14. Brasil – Fuel Distributor Companies – Several private companies are responsible for fuel distribution (supplied by Petrobras) to gas stations. (e.g.: Shell, Texaco, Esso, Ipiranga, Repsol, etc)

15. Brasil – Fuel In Brasil “gasoline” is not available but “gasohol” instead. Gasohol is obtained by blending pure gasoline and alcohol at 75%-25% in volume. Alcohol raise octane level instead of lead. Types of Gasohol: Common: 87 octanes Premium: 91 octanes Podium: 95 octanes Gasohol

16. Brasil – Fuel Alcohol Fuel derived from sugar cane and 100% produced in Brasil. This fuel is considered “ecological” as it is self-renovating and show better emission results. Brasil is most advanced country in alcohol-engines technology.

17. Brasil – Fuel Flexfuel Recently developed vehicle that may use either gasohol or alcohol or both mixed in any proportion. Engine ECU automatically calibrate injection time and ignition time for any blended fuel by receiving O 2 sensor data. Use of alcohol or gasoline in Flexfuel vehicles lays on economy balance. These vehicles has become popular quickly. From January to June/2006, 76.3 % of the sold vehicles in Brasil are Flexfueled.

18. Diesel available in Brasil is Biodiesel. Biodiesel is a blending of mineral diesel with vegetal oils. This Biodiesel was introduced in 2005 and it is a great bet of Brazilian government to develop agriculture. 98% Diesel derived of petroleum 2% Biodiesel This proportion is planned to be increase gradually to 80%-20% until 2020. Brasil – Fuel Diesel

19. Three types of Biodiesel are supplied in Brasil: Common Diesel – Sulphur value is 3,500 PPM Metropolitan Diesel – (S2000) Sulphur value is 2,000 PPM, distributed exclusively on major cities Diesel 500 – (S500) Sulphur value is 500 PPM, distributed exclusively in major cities and with critical quality of air due excessive number of vehicles Brasil – Fuel Diesel

20. In Brasil only heavy duty, commercial and off-road vehicles may use diesel. This is because diesel is bore by government to incentive industrial and commercial activities. Brasil – Fuel Diesel

21. Brasil – Fuel Vehicles adapted to use natural gas besides original fuel (gasohol or alcohol). For its low operational cost is highly used for fleet companies and taxis that ride long distances daily. The use of GNV is restricted by big gas tanks that must be installed, usually in trunks. GNV demand larger tanks than LPG. Natural Gas - GNV

22. Brasil – Fuel Fuel usage – current national fleet Gasohol: 71% Diesel: 10% Alcohol: 14% Flexfuel: 5% (Natural Gas: 3%)

23. Brasil – General Regulations Speed Limits: Up to 120 Km/h in highways Up to 60 Km/h in urban areas Due to intensive speed control by radar allied to high penalties, speed limits are generally respected.

24. Brasil – General Regulations Emission: Brasil has its own Emission Control Legislation named PROCONVE. It blends both European and US standards and government control on vehicle emissions is strict. Current Brazilian standards for emission are named CONAMA L4 for Light Vehicles and CONAMA P5 for Heavy Duty. In comparison with international legislation, Brazilian emission limits are similar to US Tier 1 for LPV/LCV and similar to Euro-III for Heavy Duty.

25. Customer Protection Legislation Brasil has one of most advanced Customer Protection Legislation. It means that any customer can claim for his rights and he will be supported by law. Normally all demands use to be in favour of customer who is judged weaker part in trade relation. So all companies do their best to avoid customers to go to the court as judge decisions may cost more than original demand. Brasil – General Regulations

26. Brasil – Market Local Makers Brasil hosts 20 different makers, being one of major automotive industries in the world. Our automotive industry started in back 1950’s. For this Brazilians have a very strong automobile culture, with general good understanding of mechanical concepts. Additionally there are several options of specialized magazines with huge number of readers. For this Brazilian customer became very demanding. They don’t accept any explanation for their cars problems without arguing besides they have a lot of options in the market for their next buying, and they make it clear very well when needed.

27. Brasil – Market Automotive media

28. Brasil – Market Makers

29. Brasil – Market Importers

30. Brasil – Major Customers Complaints Due to local road conditions vehicles show a high level of noise compared to local made vehicles. In coastal areas (high saltiness), corrosion in metal sheet, mainly on K2700 Sorento Diesel with many problems in fuel system (injectors, fuel tank, fuel filter)

31. Several occurences of differential set broke in K2700 Brake judder problems are common to all models (mainly on Sorento and K2700) Several battery problems, mainly in Winter season Sorento with lock doors problems (reoccurrences) Brasil – Major Customers Complaints

32. Brasil – Problems with Sorento CRDI All cases mentioned above are still “under investigation” by KMC Complaint: Engine hesitation Cause: Fuel flow through filter interrupted with no apparent cause Fuel Filter – 26 cases Complaint: Engine hesitation Cause: Loosen coating material from fuel tank Fuel Tank – 29 cases Complaint: Engine hesitation, irregular idle speed and noise from combustion chamber Cause: Injectors with fuel supply irregular Fuel Injector – 62 cases

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