Bloomberg News

Hyundai, Kia Paying as Much as $395 Million to Settle U.S. Suits

December 23, 2013

2012 Kia SUVs

An employee installs a cargo mat on a 2012 Kia Motors Corp. Toucon sports utility vehicle (SUV) at the International Auto Processing Inc. (IAP) facility at Georgia Ports Authority Colonel's Island auto import and export terminal in Brunswick, Georgia. Photographer: Stephen Morton/Bloomberg

Hyundai Motor Co. (005380) and Kia Motors Corp. (000270), affiliated South Korean automakers, agreed to spend as much as $395 million to settle lawsuits brought by customers claiming the companies overstated fuel-economy ratings.

Hyundai’s U.S. unit said in a statement yesterday that it will make payments totaling as much as $210 million to people who bought 2011 to 2013 model-year vehicles affected by the ratings. Customers have the choice of a lump-sum payment from Seoul-based Hyundai or to remain in a fuel-reimbursement program for as long as they own their vehicle. Kia Motors said in a separate statement that its payments to owners of about 300,000 vehicles will total as much as $185 million.

Hyundai and Kia, South Korea’s largest and second-largest automakers respectively, apologized in November 2012 for overstating the fuel economy of their vehicles and issued debit cards to buyers of about 900,000 cars and light trucks sold in the U.S. to reimburse them for higher-than-expected fuel costs.

“They both want to get this matter buttoned up to set the stage for a good product launch period,” said Jessica Caldwell, an analyst for Edmunds.com, a vehicle pricing and data service in Santa Monica, California. While the Hyundai-Kia issue “is more of a footnote now, fuel economy is important to consumers. They want to know the mileage figures claimed are real.”

Hyundai Motor fell 0.9 percent to 226,500 won as of 10:46 a.m. in Seoul trading. The shares have gained 3.9 percent this year, outperforming the benchmark KOSPI Index, which was little changed in the period. Kia Motors fell 0.2 percent to 55,600 won, and is down 1.6 percent this year.

‘Procedural Errors’

Hyundai and Kia both said “procedural errors” at a joint testing facility in South Korea led to the inaccurate fuel-economy ratings. Hyundai agreed to a tentative settlement arrangement in February, without providing financial details.

Official mileage ratings for most of the Hyundai and Kia models affected by the misstatements were lowered by 1 to 2 miles per gallon of gasoline, the companies said. Kia’s Soul wagon had the biggest reduction, with its U.S. fuel economy label rating being cut by 6 miles (9.7 kilometers) per gallon.

Ford Motor Co. (F:US) also faced criticism and lawsuits for not delivering on the high-mileage promises of its hybrids. Consumer Reports magazine singled out Ford’s Fusion and the C-Max hybrids for falling short of mileage claims.

Ford lowered the mileage rating for the 2013 model C-Max in August to 43 miles per gallon in combined city and highway driving from 47 mpg previously. It also upgraded software for the C-Max, Fusion and Lincoln MKZ hybrids in July to improve performance.

The case is Hyundai and Kia Fuel Economy Litigation, 13-ML-02424, U.S. District Court, Central District of California (Los Angeles).

To contact the reporter on this story: Alan Ohnsman in Los Angeles at aohnsman@bloomberg.net

To contact the editor responsible for this story: Jamie Butters at jbutters@bloomberg.net


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