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Hyundai And Kia Penalized $350 Million For Overstated MPG Claims

Nearly two years after Hyundai and Kia announced they exaggerated fuel economy numbers for several of their most popular models, the two Korean automakers have paid a heavy penalty for the transgressions. The Department of Justice and Environmental Protection Agency announced a settlement Monday that will cost the two car companies approximately $350 million. The financial sum includes a $100 million fine, the largest ever levied under the Clean Air Act, and about $200 million in forfeited greenhouse-gas emissions credits. At a time when car buyers rank fuel economy as a top concern when they head to dealerships and the federal government has mandated increased efficiency, Attorney General Eric Holder said the settlement should serve as a warning to automakers not to fudge their numbers. "This will send a strong message that cheating is not profitable," he said. The settlement ends a federal lawsuit filed against the automakers in U.S. District Court, but it's important to note that it doesn't end a class-action lawsuit filed on behalf of consumers. A preliminary settlement in that case, based in Los Angeles, was approved last month, but final approval isn't expected until July 2015. Officials with the EPA said the $100 million figure roughly equals the economic benefits the two companies received from exaggerating the mileage claims on the window stickers of new cars. Fuel-efficient boasts helped Hyundai and Kia establish a strong foothold in the U.S. marketplace. Advertisements for the Hyundai Elantra stated the vehicle achieved 40 miles per gallon in highway driving, and helped the car win the prestigious North American Car Of The Year honors at the Detroit Auto Show for its 2012 model. In July 2011, the advocacy group Consumer Watchdog began receiving complaints from consumers that the Elantra and other Hyundai models fell short of their stated mileage claims in real-world driving. The group wrote to the EPA and Hyundai, asking both to investigate. Government officials said Kia had overstated the mileage on its popular Kia Soul crossover by 6 miles per gallon, and more than a dozen overall models were affected. On Monday, EPA administrator Gina McCarthy said the violations were "egregious." Based on the exaggerations, the EPA calculated that Hyundai and Kia had underreported the greenhouse gas emissions of their fleets by about 4.75 metric tons over the estimated lifetime of the vehicles. That figure aided in the $200 million credit forfeiture.

Hyundai plans to catch up with other automakers, offer EVs

YONGIN, South Korea (Reuters) - South Korea's Hyundai Motor Co is developing its first dedicated architecture for electric vehicles, seeking to catch up with the likes of Tesla in the growing segment with multiple, long-range models. While the platform will not be completed soon, Hyundai Motor and affiliate Kia plan to roll out small electric sport utility vehicles (SUVs) based on an existing underpinning next year, said Lee Ki-sang, who leads Hyundai-Kia's green cars operations. Hyundai will launch an electric SUV, followed by a sibling model by Kia Motors next year, Lee said, citing strong demand for SUVs. The subcompact or compact models would have a range of more than 300 km (186 miles) per charge, and would be "more competitive" than rival offerings, Lee said. And Hyundai said in a statement on Thursday that it plans to launch a new luxury electric vehicle under its Genesis marque in 2021, after introducing a plug-in hybrid version of an unidentified Genesis model in 2019. The separate platform represents a major push into the battery electric-car segment for a firm which has long trumpeted rival fuel-cell vehicles, reflecting strong investor pressure to compete more vigorously in a market that has been stimulated by U.S.-based Tesla's longer-range models. And tough fuel-economy and emissions regulations in the United States, Europe and China are compelling automakers to push fuel-efficient cars even though low oil prices have undercut demand. Hyundai's electric-car platform would allow the automaker to install a battery pack in vehicle floors to accommodate more battery capacity and maximize cabin space, Lee said. "The electric-vehicle platform will require high up-front investments, but we are doing this to prepare for the future," he said at Hyundai-Kia's green car research center in the city of Yongin, outside Seoul. He did not reveal the cost. Lee, a senior vice-president at Hyundai Motor, was speaking during an interview on the eve of an auto show that kicked off in Seoul on Thursday. Analysts said Hyundai had no choice but to build separate electric-vehicle platforms to be relevant in the segment. "The separate platform may incur losses initially, but Hyundai will be left behind the market if they don't offer long-distance models, like 300 km, 500 km and 600 km," said Ko Tae-bong, an analyst at Hi Investment & Securities.

Kia calls reports of second US plant 'groundless'

In discussing how Kia planned to use a focus on quality to raise its brand perception and take the fight to BMW and Audi instead of Toyota, a recent article in Automotive News Europe said one of the primary constraints was production capacity; Kia simply doesn't have the ability to make enough cars to meet its aims with the plants it has.
The CEO of Hyundai-Kia is said to be reluctant to build more plants because of that focus on quality and the fact that its suppliers are stretched to the limit. The effects of that position are being felt right now with both makers losing market share, as in the case of Hyundai not being able to make enough of its Veloster Turbo for the US market.
A South Korean newspaper apparently reported last week that Kia was planning to build a second factory in Georgia with capacity for up to 150,000 units annually, and that the company would break ground as soon as this month on "KMMG2." Kia has responded to the news by saying, "The report is all groundless." The mayor of West Point, site of the current KMMG plant, said he didn't know anything about such plans, nor did the Georgia department of economic development have knowledge of a new Kia factory.