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US prosecutors are investigating the engines of Hyundai Motor and its subsidiary Kia Motors to find out if the vehicle recalls were done properly, according to a source and documents reviewed by Reuters.
South Korean companies, which are the world's No. 5 automaker, have recalled nearly 1.7 million vehicles in 2015 and 2017 in the United States at one of their biggest recalls in the country , citing an engine failure that increases the risk of an accident.
The US District Attorney's Office in the Southern District of New York (SDNY), part of the US Department of Justice (DoJ), has opened a criminal investigation, said this person, who knew of the case, to Reuters.
It remains to be seen if the probe will lead to charges, added the person. If criminal charges are filed, it could result in heavy fines for Hyundai and Kia.
An investigation by US prosecutors adds to the woes of Hyundai and Kia at a time when they are struggling with sluggish sales in the United States and China.
The duo's shares fell Thursday after the news. Hyundai lost 3.2%, its lowest level in nearly nine years, and Kia lost 4.8%.
Hyundai Mobis, their spare parts subsidiary, also slipped 6.5% in a wider market that lost 0.3%.
"There is a lot of uncertainty around the US investigations, and if charges are laid, it would not only result in fines, but also damage to their brand and sales," said analyst Angela Hong. Nomura.
The Ministry of Justice is coordinating the road safety investigation with the NHTSA (National Highway Traffic Safety Administration), she added, asking not to be identified as the case is confidential.
Nicole Navas Oxman, a spokeswoman for the DoJ, declined to comment.
"As a rule, the Justice Department does not confirm, deny and comment on the existence or not of an investigation," she said in a statement sent to Reuters by mail electronic.
The United States has already investigated and imposed strict sanctions on other automakers, such as Toyota Motor and Volkswagen AG.
In 2017, a US judge dismissed a criminal charge against Toyota after three years of surveillance under a $ 1.2 billion settlement in which she had admitted to misleading the public about the $ 50 million charge. a sudden and involuntary acceleration of his vehicles.
The settlement included the heaviest fine imposed by a US auto company until Volkswagen admits a fraud on diesel emissions and pays a fine of 4.3 billion US dollars in 2017 .
In addition to the SDNY investigation, Hyundai and Kia are also being investigated by NHTSA as to whether their recalls covered enough vehicles and had proceeded quickly.
NHTSA has "active" investigations into engine problems with certain Hyundai and Kia vehicles, the regulator told Reuters.
"These investigations are ongoing – no final conclusions have been drawn," the office added.
Hyundai declined to comment on the SDNY probe.
Hyundai and Kia have already reserved around 1 trillion won (US $ 885 million) in 2017 and 2018 to cover costs mainly related to recalls for engine problems.
In the United States, Hyundai recalled 470,000 Sonata sedans in 2015 due to the failure of the "Theta II" engines.
In 2017, it extended its US recall to 572,000 sport utility vehicles Sonata and Santa Fe, citing the same engine problem, NHTSA said.
Kia also recalled 618 160 Optima, Sorento and Sportage vehicles using the same engine in the United States.
However, Kim Gwang-ho, a Hyundai engineer and a 26-year veteran of the company, told NHTSA that companies should have recalled more vehicles in 2015, citing an internal report.
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