South Korean automakers Hyundai and Kia will pay a $100 million fine, the largest in Clean Air Act history, for inflating the fuel-economy ratings of their vehicles, the Environmental Protection Agency said Monday.
The agreement stemmed from an investigation by the EPA and the Department of Justice into Clean Air Act violations based on the sale of about 1.2 million vehicles with overstated ratings by the two automakers. The inflated fuel-economy ratings also resulted in the emission of approximately 4.75 million metric tons of greenhouse gases in excess of what the automakers certified to the EPA.
“This settlement upholds the integrity of the nation’s fuel-economy and greenhouse-gas programs and supports all Americans who want to save fuel costs and reduce their environmental impact,” said EPA Administrator Gina McCarthy. “Businesses that play by the rules shouldn’t have to compete with those breaking the law.”
The automakers also will spend $50 million on measures to prevent any future violations. Hyundai and Kia will forfeit 4.75 million greenhouse-gas-emission credits that the companies previously claimed, which the EPA said are worth about $200 million.
“This type of conduct quite simply will not be tolerated,” said Attorney General Eric Holder. “And the Justice Department will never rest or waver in our determination to take action against any company that engages in such activities.”
The California Air Resources Board was party to the agreement and will collect about $6.3 million of the settlement.
Environmental groups praised the enforcement action.
“Consumers deserve accurate information on emissions and fuel economy when they go to the showroom,” said Luke Tonachel, a senior vehicles analyst at the Natural Resources Defense Council.
Frank O’Donnell, President of Clean Air Watch, said that while much attention is paid to fuel-economy ratings, “it is very encouraging to see that EPA plans to make sure that climate-related emissions must also be as advertised.”
A 2012 audit by the EPA found that Hyundai and Kia discovered the problem in a dozen vehicles, including the popular Hyundai Elantra and Santa Fe, and Kia Sorento.
The companies — which are corporate siblings — blamed the inflated mileage ratings on “procedural errors” at a jointly operated test center in South Korea. Hyundai and Kia overstated the fuel economy by one to six miles per gallon, depending on the vehicle, the EPA said.
EPA investigators alleged that the automakers chose favorable results rather than average results from a large number of tests that go into the certification of the fuel-economy ratings found on the window stickers of new cars.
The EPA began investigating after consumers complained.
The South Korean automakers issued an apology and said they would give special debit cards to the vehicle owners to make up for the difference in the lower miles-per-gallon logged by the vehicles.
Consumers and class-action attorneys said the debit-card system was too complicated for car owners, and filed a series of lawsuits seeking damages. A settlement to that class-action lawsuit is expected to be approved by a Los Angeles federal judge next year.
“The damage to consumers is far greater than the $100 million fine announced by the government,” said Harvey Rosenfield, an attorney involved in the class-action litigation.
The proposed class-action settlement is estimated at about $400 million, but Rosenfield believes far less will be paid by Hyundai and Kia because of the complex form consumers will have to file to claim their share of the settlement.
Hyundai said it will pay $56.8 million of the $100 million civil penalty in the agreement with the EPA and Justice Department.
It also will forgo the use of about 2.7 million greenhouse-gas-emission credits and form an independent certification test group to oversee the automaker’s fuel-economy testing, training, data management and reporting. Additionally, Hyundai will continue to audit model-year 2015-16 vehicles to confirm the accuracy of their fuel-economy ratings.
“Hyundai has acted transparently, reimbursed affected customers and fully cooperated with the EPA throughout the course of its investigation,” said David Zuchowski, CEO of Fountain Valley, Calif.-based Hyundai Motor America. “We are pleased to put this behind us.”
Kia Motors America, the Irvine, Calif.-based U.S. sales arm of the Korean brand, also issued a statement saying it was glad to have the matter resolved and noted that consumers who purchased affected vehicles can still register for the fuel-cost-reimbursement program.
The Hyundai vehicles with inflated fuel-economy ratings are the Accent 2012-13 model years, Azera 2012-13, Elantra 2011-13, Genesis 2012-13, Santa Fe Sport 2013, Sonata Hybrid 2011-12, Tucson 2012-13 and the Veloster 2012-13.
The affected Kia vehicles are the Optima Hybrid 2011-12 model years, Rio 2012-13, Sorento 2012-13, Soul 2012-13 and Sportage 2012-13.