Huge Fuel-Economy Penalty for Hyundai, Kia

(CN) - Accused of overstating fuel-economy standards on 1.2 million vehicles, Hyundai and Kia reached a record $100 million settlement Monday.

The U.S. Justice Department and the Environmental Protection Agency heralded the amount as the largest civil penalty ever paid for violation of the Clean Air Act.

Hyundai and Kia, both Korean automakers, have also agreed to forfeit $200 million in greenhouse-gas emission credits that companies claimed to have earned by building vehicles with lower emissions than required by law.

The settlement furthermore commits the companies to spend about $50 million on preventing future violations. Such measures include reorganizing emissions-certification groups, revising test protocols and improving management of test data, according to the government's release.

In the meantime, Hyundai and Kia must audit their fleets for model years 2015 and 2016 to ensure that vehicles sold to the public conform to the description and data provided to EPA.

"This type of conduct quite simply will not be tolerated," Attorney General Eric Holder said in a statement. "I believe this will send an important message to automakers around the world that they must comply with the law."

The underlying federal complaint, which the agencies and the California Air Resources Board filed along with the deal in Washington, D.C., involves 1.2 million cars and SUVs from model years 2012 and 2013 sold by Hyundai and Kia. Regulators said the design specifications of those cars did not conform to the specifications the companies certified to EPA, leading to the greenhouse-gas emission misstatements.

At issue are Hyundai's Accent, Elantra, Veloster and Santa Fe vehicles, and Kia's Rio and Soul vehicles.

Regulators also accused Hyundai and Kia of misinforming drivers about the real-world fuel-economy performance of many of these vehicles. Hyundai and Kia overstated the fuel economy by one to six miles per gallon, depending on the vehicle, the complaint says.

The EPA allegedly discovered the violations during routine auditing in 2012. A subsequent investigation revealed that Hyundai and Kia's testing protocol included numerous elements that led to inaccurately higher fuel-economy ratings. In processing test data, Hyundai and Kia allegedly chose favorable results rather than average results from a large number of tests.

Hyundai and Kia responded to the EPA's findings in November 2012 by correcting the fuel-economy ratings for many of their 2011, 2012 and 2013 model-year vehicles, the Justice Department said. That correction involved a reimbursement program to compensate owners for increased fuel costs due to overstated fuel economy.

This case involves five different entities: Hyundai Motor Co., Hyundai Motor America, Kia Motors Corp., Kia Motors America and Hyundai America Technical Center Inc.

The California Air Resources Board joined the agencies as co-plaintiff in the settlement, and will receive $6,343,400 of the $100 million civil penalty.

A federal judge must still approve the proposed consent decree, which is also subject to a 30-day public comment period.

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