US prosecutors investigate Hyundai and Kia vehicle recalls; actions collapse

SEOUL / WASHINGTON (Reuters) – Hyundai Motor (005380.KS) and the subsidiary Kia Motors (000270.KS) are being investigated by US prosecutors as to whether the vehicle recalls were done properly, said a source and the documents reviewed by Reuters revealed that their actions were flowing.

South Korean companies, 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 of the South District of New York (SDNY), part of the United States Department of Justice (DoJ), has opened a criminal investigation, told Reuters this person who was aware of the case. 39; case.

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 slow sales in the United States and China.

The duo's shares fell on Thursday after the news, with Hyundai losing 3.2% to its lowest level in nearly nine years and Kia losing 4.8%. Their subsidiary, Hyundai Mobis (012330.KS), also slipped 6.5% in a wider .KS11 market that slipped 0.3%.

"There are many uncertainties around US investigations. If charges are laid, this would not only result in fines, but also negatively impact their brand image and sales, "said Angela Hong, an analyst at Nomura.

Department of Justice coordinates investigation with US Transportation Regulatory Authority, NHTSA, on inquiry issue, said person, asking not to be identified because case is confidential .

Nicole Navas Oxman, a spokeswoman for the DoJ, declined to comment.

"As a rule, the Ministry of Justice does not confirm, deny and comment on the existence or non-existence of an investigation," she said in a statement. sent to Reuters by email.

The United States has already investigated and imposed strict penalties on other automakers, such as Toyota Motor (7203.T) and Volkswagen AG (VOWG_p.DE).

In 2017, a US judge denied a criminal charge against Toyota after three years of surveillance under a $ 1.2 billion settlement in which she admitted to misleading the public about a sudden acceleration and involuntary of his vehicles.

The settlement included the most significant fine imposed by the US on a carmaker until Volkswagen admits diesel emission fraud and pays $ 4.3 billion fine 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 is conducting "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," adds the text.

Hyundai declined to comment on the SDNY probe.

COST OF RECALLS

Hyundai and Kia have already set aside around 1 trillion won (£ 692.5 million) in 2017 and 2018 to cover costs mainly related to engine boosters.

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.