NHTSA Imposes Engine Recalls, Penalties at Hyundai, Kia

The National Highway Traffic Safety Administration has imposed “consent orders” with Hyundai Motor America and Kia Motors America related to engine stalling recalls for vehicles equipped with Theta II direct-injection gasoline engines. The combined penalties amount to $210 million for defects that caused stalling.*

These consent orders do not affect separate, ongoing investigations by NHTSA’s Office of Defects Investigation regarding allegations of non-crash fires in certain Hyundai and Kia vehicles, some of which are equipped with Theta II engines.

NHTSA says that both Hyundai and Kia conducted untimely recalls of more than 1.6 million vehicles equipped with Theta II engines, and inaccurately reported certain information to NHTSA regarding the recalls.

Background

On September 10, 2015, Hyundai filed a DIR with NHTSA. This recall was assigned NHTSA recall number 15V-568. Hyundai recalled certain Model Year 2011-2012 Sonata vehicles equipped with 2.4L and 2.0L Theta II Gasoline Direct Injection (“GDI”) engines. The chronology in the Defect Information Report stated:

The 2011 Hyundai Sonata was the first Hyundai vehicle to use an engine manufactured in Hyundai’s Alabama engine factory. As is the case with any production process, revisions were made to the manufacturing processes. Hyundai initially used a mechanical deburring process to remove machining debris from the crankshaft. In April of 2012, Hyundai incorporated a high pressure “wet blast” process to remove metallic debris from the component.

As the Sonatas incurred mileage, Hyundai became aware of engine-related warranty claims in the field. Most of those claims said that customers were responding to substantial noise, or the vehicle’s check engine light, and bringing their vehicles to service because of those warnings. Many customers also complained after the warranty was no longer available. In a relatively smaller number of instances, customers reported stalling events. However, most of those customers did not mention the speed at which the vehicle was moving at the time of the reported stalling event. These customers were also able to restart their vehicles and/or move the vehicles to the side of the road.

In June, 2015, NHTSA raised the issue with Hyundai. Hyundai claimed that, as of that time, it did not consider the issue to be safety-related due to the substantial warnings and the evidence that customers were responding to the warnings, among other reasons. Upon reviewing Hyundai’s information, the Office of Defects Investigation informed Hyundai of its concern over the potential for higher speed stalling events. These discussions occurred throughout August, 2015. On September 2, 2015, this issue was discussed at HMA’s Technical Committee meeting. At that time, Hyundai decided [to] conduct the field action as a safety recall and to file this Defect Information Report.

The consent orders establish both monetary and non-monetary measures designed to “enhance each company’s safety practices.” In addition to monetary penalties, Kia will be creating a new U.S. safety office headed by a Chief Safety Officer, and Hyundai will be building a U.S. test facility for safety investigations. Both companies will develop and implement sophisticated data analytics programs to better detect safety-related concerns.

Under the agreements, Kia and Hyundai will retain an independent, Third-Party Auditor, who will directly report to NHTSA. Each Third-Party Auditor will conduct a comprehensive review of the company’s Safety Act practices and compliance with the consent order. Both companies also committed to substantial organizational improvements to enhance their ability to identify and investigate potential safety issues in the United States, as well as facilitate consistent and transparent communication with NHTSA.

“Safety is NHTSA’s top priority,” said NHTSA Deputy Administrator James Owens. “It’s critical that manufacturers appropriately recognize the urgency of their safety recall responsibilities and provide timely and candid information to the agency about all safety issues.”

*Consent Orders

Under the consent order, Hyundai is subject to a total civil penalty of $140 million. This includes an upfront payment of $54 million, an obligation to expend an additional $40 million on specified safety performance measures, and an additional $46 million deferred penalty that may become payable if specified conditions are not satisfied. The Hyundai consent order is for three years, with an option for NHTSA to extend the order for an additional year if warranted.

Under the Kia consent order, the company is subject to a total civil penalty of $70 million. This includes an upfront payment of $27 million, an obligation to expend an additional $16 million on specified safety performance measures, and an additional $27 million deferred penalty that may become payable if specified conditions are not satisfied. The Kia consent order is for two years, with an option for NHTSA to extend the order for an additional year if warranted.

About Ken Zino

Ken Zino is an auto industry veteran with global experience in print, broadcast and electronic media. He has auto testing, marketing, public relations and communications expertise garnered while working in Asia, Europe and the U.S.
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