Hyundai Kia to pay record $100M penalty for GHG conformity violations lose $200M+ in emission credits

3 November 2014

Hyundai and Kia will pay a combined $100-million civil penalty, the largest in Clean Air Act history, to resolve violations concerning the testing and certification of vehicles sold in the US (“Conformity Violations”) and will spend approximately $50 million on measures to prevent any future violations. Hyundai and Kia will also forfeit 4.75 million greenhouse gas emission credits that the companies previously claimed, which are estimated to be worth more than $200 million. (The value for GHG emission credits is not set or controlled by EPA; it is determined by the market of automakers that buy and sell these credits.)

The US Environmental Protection Agency (EPA) and the US Department of Justice announced the historic settlement which will resolve alleged Clean Air Act violations based on the sale of close to 1.2 million vehicles that will emit approximately 4.75 million metric tons of greenhouse gases in excess of what the automakers certified to EPA.

<!——>

• Hyundai will pay a $56.8-million civil penalty and forgo the use of approximately 2.7 million greenhouse gas (GHG) emission credits.

• Kia will pay a $43.2-million civil penalty and forgo the use of approximately 2.05 million GHG emission credits.

Automakers earn greenhouse gas emissions credits for building vehicles with lower emissions than required by law. These credits can be used to offset emissions from less fuel-efficient vehicle models or sold or traded to other automakers for the same purpose. The greenhouse gas emissions that the forfeited credits would have allowed are equal to the emissions from powering more than 433,000 homes for a year.

The consent decree embodying the settlement was filed today jointly by the United States and the California Air Resources Board in the US District Court for the District of Columbia. It alleges that the car companies sold close to 1.2 million cars and SUVs from model years 2012 and 2013 whose design specifications did not conform to the specifications the companies certified to EPA, which led to the misstatements of greenhouse gas emissions. These allegations concern the Hyundai Accent, Elantra, Veloster and Santa Fe vehicles and the Kia Rio and Soul vehicles.

Additionally Hyundai and Kia gave consumers inaccurate information 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. Similarly, they understated the emissions of greenhouse gases by their fleets by approximately 4.75 million metric tons over the estimated lifetime of the vehicles.

In order to reduce the likelihood of future vehicle greenhouse gas emission miscalculations, Hyundai and Kia have agreed to reorganize their emissions certification group, revise test protocols, improve management of test data and enhance employee training before they conduct emissions testing to certify their model year 2017 vehicles. 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.

EPA discovered these violations in 2012 during audit testing. Subsequent investigation revealed that Hyundai’s 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.

In November 2012, Hyundai and Kia responded to EPA’s findings by correcting the fuel economy ratings for many of their 2011, 2012 and 2013 model year vehicles and establishing a reimbursement program to compensate owners for increased fuel costs due to overstated fuel economy.

The adjustment affected approximately one-quarter of Hyundai 2011-13 model year vehicles, reducing their combined city/highway fuel economy by 1-2 miles per gallon (mpg).

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

The California Air Resources Board joined the United States as a co-plaintiff in this settlement, and will receive $6,343,400 of the $100-million civil penalty. The proposed consent decree is subject to a 30-day public comment period and court review and approval. A copy of the consent decree is available on the Department of Justice website at http://www.justice.gov/enrd/Consent_Decrees.html.