If automakers believed they had wiggle room with Environmental Protection Agency (EPA) officials on fuel economy, the idea came crashing down on Monday. In a joint news conference with the U.S. Department of Justice, EPA Administrator Gina McCarthy announced that Kia and Hyundai would settle a civil case over Clean Air Act violations at the cost of $100 million along with other penalties valued at $250 million relating to the case. The Korean automakers’ alleged offenses involved overstating the efficiency of vehicles to both the EPA and U.S. consumers.
$350 million for 1.2 million vehicles
The $100 million fine, the largest ever levied for actions violating the Clean Air Act, came down on Kia and Hyundai along with the forfeiture of 4.75 million greenhouse gas emissions credits, valued at $200 million. In an effort to ensure more accurate fuel economy ratings in the future, Hyundai and Kia, corporations under the same chairman, will spend $50 million to set up an independent testing service for their vehicles, bringing the grand total of the settlement to at least $350 million.
According to the EPA statement, Kia and Hyundai misrepresented the performance of 1.2 million vehicles sold in the U.S. for the 2011, 2012, and 2013 model years. This inaccurate information led to higher miles-per-gallon ratings than they deserved and could contribute 4.75 million metric tons of greenhouse gases more than expected. U.S. Attorney General Eric Holder joined McCarthy at the news conference in what was a stinging rebuke of the the automakers’ conduct.
“This unprecedented resolution with Hyundai and Kia underscores the Justice Department’s firm commitment to safeguarding American consumers, ensuring fairness in every marketplace, protecting the environment, and relentlessly pursuing companies that make misrepresentations and violate the law,” Holder said. “This type of conduct quite simply will not be tolerated.”
“Greenhouse gas emission laws protect the public from the dangers of climate change, and today’s action reinforces EPA’s commitment to see those laws through,” said McCarthy. “Businesses that play by the rules shouldn’t have to compete with those breaking the law.”
CARB versus Kia and Hyundai
The California Air Resources Board (CARB) filed the suit along with the U.S. Attorney in D.C. District Court and focused on claimed performance data for the Kia Soul, Hyundai Elantra, Kia Optima Hybrid, Hyundai Tucson, and numerous other vehicles falling under the corporate siblings’ respective banners. As part of the settlement, CARB will receive over $6 million of the civil fine as compensation. Hyundai and Kia both released statements acknowledging the settlement and offered information on the compensation they are offering to affected vehicle owners.
In Hyundai’s case, defiance leaked through its company statement. Suggesting “a data processing error” was at fault for its inaccurate performance data, the automaker highlighted the EPA’s “broad latitude” (a phrase used twice) for vehicle manufacturers in calculating their figures.
Taking Hyundai’s claim at face value, it would appear the latitude has gotten narrower with the current EPA administration. For the world’s biggest automakers, the settlement should serve as a $350 million wakeup call.