Hyundai-Kia face another U.S. recall safety probe

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SEOUL / WASHINGTON – US prosecutors are investigating whether Hyundai Motor and Kia Motors vehicle have been properly executed in connection with engine failure, according to a knowledgeable person and documents reviewed by Reuters.

The South Korean companies, together the No. 5 automaker in the world, brought almost 1.7 million vehicles back in 2015 and 2017 in one of their largest recall campaigns in the United States, with engine failure the risk of a crash increases.

The American Attorney Office for the Southern District of New York, part of the US Department of Justice, has instituted a criminal investigation, the person told Reuters.

It remains to be seen if the probe will lead to accusations, the person added. If criminal charges are filed, this can lead to hefty fines for Hyundai and Kia.

The DoJ coordinates with the American transport regulator, National Highway Traffic Safety Administration, about the investigation, the person said, and asked not to be identified because the case is confidential.

Nicole Navas Oxman, a spokeswoman for the DoJ, declined to comment.

"The Ministry of Justice does not confirm, deny or otherwise comment on the existence or absence of an investigation," she said in a statement by e-mail to Reuters.

The United States has previously done research and imposed strict penalties on other car manufacturers such as Toyota Motor Corp. and Volkswagen Group.

In 2017, a judge in the United States rejected an allegation against Toyota after it had completed three years of surveillance under a settlement of $ 1.2 billion, which allowed it to mislead the public about sudden accidental acceleration of its vehicles.

The settlement was the largest fine levied by the United States on a car company until Volkswagen gave in to diesel emission fraud and paid $ 4.3 billion in fines in 2017.

Apart from the American probe in New York, Hyundai and Kia are also the subject of an investigation by NHTSA into the question whether their recalls covered sufficient vehicles and were implemented on time.

NHTSA has "active" research into engine problems related to certain Hyundai and Kia vehicles, the regulator to Reuters.

"These investigations are underway – no definite conclusions have been drawn," it added.

Hyundai declined to comment on the SDNY probe.

More misery

An investigation by prosecutors from the United States will contribute to the misery of Hyundai and Kia at a time when they are struggling with slow sales in the United States and China.

In 2017 and 2018, the pair has already booked around 1 trillion won ($ 885 million) to cover the costs, mainly as a result of recall campaigns on engine problems.

In the United States, Hyundai recalled 470,000 Sonata sedans in 2015 due to the failure of "Theta II" engines. In 2017, it expanded its American recall to 572,000 Sonata and Santa Fe crossovers, with the same cause for the engine, according to the NHTSA.

Kia also recalled 618,160 Optima, Sorento and Sportage vehicles using the same engine in the United States.

However, Kim Gwang-ho, an engineer at Hyundai and a veteran of the 26-year-old company, told NHTSA that the companies should recall more vehicles in 2015, citing an internal report.