Hyundai Pays $17 Million Fine for Delaying Genesis Brake Recall

Hyundai will pay a $17 million federal fine for failing to promptly report a brake problem in Hyundai Genesis cars, the National Highway Traffic Safety Administration said Thursday.

The action by the auto-safety agency marks a step up in enforcement. Both Toyota and General Motors have paid large federal fines this year for either not recalling vehicles promptly or misleading regulators and others about safety defects.

The Hyundai fine covers 43,500 Genesis cars from the 2009-2012 model years. The defect involves corrosion in the brake system that can make it more difficult to stop and increase the risk of a crash, regulators said.

“Safety is our top priority, and all automakers should understand that there is no excuse for failing to report a safety-related defect, as required by law,” said Anthony Foxx, secretary of the Transportation Department, which operates the NHTSA. “This Administration will act aggressively and hold automakers accountable when they put the American public at risk.”

Instead of recalling the cars, Hyundai issued a “Technical Service Bulletin” to its dealers asking them to replace the brake fluid if they discovered the problem or if an owner complained. But Hyundai failed to inform all Genesis owners of the potential safety consequences of the problem, the safety agency said. Eventually, Hyundai recalled the cars, after the NHTSA opened an investigation into the brake defect.

The NHTSA investigation found that Hyundai knew that brake fluids used in the Genesis models did not sufficiently inhibit corrosion in key components of the vehicle’s brake system.

Hyundai said there have been no fatalities caused by the brake-system defect. But the NHTSA has tracked six collisions, including two reports of injuries.

“Federal law requires automakers to report safety-related defects to NHTSA within five days, and neither NHTSA nor the American public will accept anything less,” said NHTSA acting Administrator David Friedman. “Hyundai failed to act to protect their customers and others that were harmed in an accident, and must change the way they deal with all safety-related defects.”

Hyundai signed a consent decree promising to make improvements to its processes for identifying, reporting and communicating safety-related defects. It will create a U.S.-based technical committee to review and make decisions regarding potential Hyundai-specific safety recalls, the NHTSA said.

“In order to mitigate a situation like this in the future, Hyundai is instituting new organizational and process improvements, and enhancing the ability of the U.S. leadership team to readily respond to regulatory reporting requirements,” said David Zuchowski, chief executive of Fountain Valley, Calif.-based Hyundai Motor America, the South Korean automaker’s U.S. sales arm.

Hyundai, for example, is adding staff to review potential defects and complaints. The automaker also said it plans to meet with the NHTSA on a regular basis regarding safety issues.

Earlier this year, Toyota Motor Corp. agreed to pay a $1.2 billion Department of Justice fine to settle a four-year federal criminal investigation into whether it properly reported safety complaints about the sudden acceleration of its vehicles to regulators. It remains the largest penalty of its kind ever imposed on an automotive company in the U.S.

Also this year, the NHTSA fined General Motors Corp. its maximum $35 million for delays in recalling vehicles with faulty ignition switches that have been linked to 13 deaths. GM remains under investigation for delaying recalls by the NHTSA, the Department of Justice and Congress, and could face more fines.