To settle U.S. class action litigation and address engine-related issues Hyundai Motor Co (005380.KS) and affiliate Kia Motors Corp (000270.KS) have earmarked 900 billion won ($758 million) in the United States and South Korea.
The move marks the South Korean auto giant’s first major effort to resolve years of trouble over engine defects that have also sparked probes by the U.S. safety regulator and prosecutors. Hyundai Motor will make a provision of about 600 billion won in its July to September earnings while Kia will book one for about 300 billion won, they said on Friday. Hyundai and Kia said in a statement that under the U.S. settlement they would install software to monitor for symptoms of engine failure and take other steps, including offering compensation options and lifetime warranties which is a huge commitment to make. A total of 4.17 million Hyundai and Kia models equipped with the brand new Theta II gasoline direct injection (GDI) engines will be affected by the U.S. settlement. Hyundai and Kia, together with the world’s fifth-biggest automaker by sales, recalled nearly 1.7 million vehicles in the United States to address the possibility of engine fires although the major cause was not found.
In November, Reuters reported that U.S. federal prosecutors had launched a criminal investigation to determine if the recalls had been conducted properly. Since 2017, the U.S. safety regulator has been investigating whether the recalls covered enough vehicles and were conducted in a timely manner. The Korean carmakers will be facing major challenges from the major brands that are preparing to recover their losses and launch electric vehicles to compete.
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