Coverage: Kia, Hyundai fined by U.S.

Kia and Hyundai will be paying up after misstating car emissions. The fine is a record for those paid under the Clean Air Act and could signal a change in how carmakers are held accountable for reporting.

The Washington Post story by Joby Warrick and Steven Mufson had these details:

The Obama administration Monday announced a settlement of more than $300 million with South Korean automakers Kia and Hyundai for understating greenhouse-gas emissions from nearly 1.2 million of their cars and trucks.

The record fine of $100 million and other penalties were described as the largest enforcement action of its kind under the federal Clean Air Act, in an unusual case involving emissions credits earned by manufacturers for producing low-emission vehicles, Environmental Protection Agency and Justice Department officials said in announcing the agreement.

Under the terms of a voluntary consent decree, Hyundai and Kia also will forfeit 4.75 million greenhouse-gas credits, estimated to be worth more than $200 million. Car companies earn the credits for manufacturing vehicles that emit less greenhouse-gas pollution than the law requires.

Jeff Plungis wrote for Bloomberg that the companies used the best results instead of averages to report their emissions:

Hyundai’s violations were larger and more systemic representing “by far the most egregious case,” EPA Administrator Gina McCarthy said today at a news conference in Washington with U.S. Attorney General Eric Holder.

Hyundai and Kia used uncommon engineering protocols, inconsistent with how other automakers test fuel economy, McCarthy said.

The companies tested cars only at optimal temperatures and used the best results rather than averages, according to the EPA. The inflated mileage claims affected 1.2 million vehicles sold in the U.S., McCarthy said.

The automakers had agreed in 2012 to compensate consumers by issuing debit cards to affected customers. The Kia Soul’s corrected window sticker was down 6 miles per gallon. Most other U.S. models were adjusted down by 1 or 2 miles per gallon.

The Wall Street Journal story by Joseph B. White said that the companies will give up some credits as part of the punishment:

Under the agreement with U.S. regulators, Hyundai and Kia will surrender 4.75 million of the greenhouse-gas credits they built up under the U.S. corporate average fuel-economy system for 2012 and 2013 models. These are effectively bonus points that allow the companies to sell larger, less efficient but usually more profitable models such as sport-utility vehicles or luxury cars. The EPA valued these credits at more than $200 million.

Hyundai-Kia also agreed to set up an independent certification group to oversee fuel-economy testing and audit their 2015 and 2016 fleet mileage claims as part of a $50 million commitment to avoid future violations.

The EPA and Justice Department pursuit of Hyundai fits into a broader push by the Obama administration to show toughness toward companies that flout federal laws. The administration is under fire from both Republicans and Democrats in Congress for moving too slowly to force auto makers to launch safety recalls.

The New York Times story by Coral Davenport and Bill Vlasic pointed out the carmakers had touted their efficiency to customers:

For years Hyundai and Kia built their brands around the idea that their cars got better mileage than their competitors, a claim they promoted in ads that denigrated less efficient rivals.

But in 2012, Hyundai and Kia, which are both owned by the Hyundai Motor Group, acknowledged that they had overstated the fuel economy of vehicles sold in the United States over the previous two years. The admission came after an E.P.A. investigation into consumer complaints that their cars were underperforming the official mileage estimates on the window stickers of new cars. Although few drivers achieve the mileage claimed on the stickers, the government requires automakers to conduct standardized tests to calculate the figures so that buyers can more easily compare the fuel efficiency of different models.

At the time, both Hyundai and Kia apologized for what they called “procedural errors” in testing that resulted in incorrect mileage stickers on some of their most popular models, including the Hyundai Elantra and Kia Rio. On Monday, the companies continued to say that the misstatement of fuel mileage was inadvertent and that they did not intentionally mislead customers.

It’s hard to believe that the misstatements weren’t intentional. But it is good to see that the government is actually using laws to fine companies for violations. While $100 million might not be an astronomical amount of money, it does send a signal that companies can’t violate the rules without some sort of repercussions. This does make it hard for consumers to make decisions if they can’t trust the information they’re given.