Is Hyundai treated fairly?

A series of class action lawsuits have been filed or are being prepared against Hyundai Motor and its sister automaker Kia Motors for overstating the fuel economy of 13 of their vehicles sold in North America during the past two years.

Although the two automakers quickly admitted to the misconduct and promised to reimburse owners of the cars for the differences in the companies’ reported fuel economy ratings, plaintiffs and their attorneys argue that the compensation program is not simply enough.

But analysts downplay the impact of such lawsuits on the nation’s two largest automakers.

“Such collective lawsuits are very common in the U.S., which Hyundai and Kia have prepared for,” IBK Securities analyst Ahn Se-hwan said. “In fact, foreign investors here are buying more shares in Hyundai and Kia even after the revelation of the overstated fuel economy and after-measures by the automakers.”

He carefully added that he thought the problem has been overhyped by the media and local investors.

The latest lawsuit was filed by Hagens Berman, a Seattle-based consumer-protection law firm, representing 23 Hyundai and Kia owners. The firm claimed that the economic harm could easily approach $775 million, describing the reimbursement program as a “runaround to avoid paying what’s due.”

The overstated mileage fiasco began after the Environmental Protection Agency (EPA) said they found that the Korean companies made false claims on mileage estimations based on an audit following complaints by consumers. It said the fuel economy ratings of the vehicles in question were overstated by 3 percent on average.

Upon disclosure of the figures, the two automakers apologized to customers and promised to issue debit cards to owners of the affected cars in the U.S. and Canada to compensate for the mistake.

The EPA’s findings come at a bad time for the two automakers, which have seen explosive sales growth in the U.S. partly because of advertising campaigns that touted gas mileage, and the scandal is expected to have an impact on sales and mostly importantly on the reputation of the two brands.

Market insiders said that Hyundai and Kia can become easy targets of criticism for their mistakes because they are the fastest-growing car brands in the North American market.

“Things would have been different with other domestic automakers such as the Ford, Chrysler or General Motors,” said Kim Dong-ha, an analyst at Kyobo Securities. “There surely seems to be a tendency that people or the government try to protect their own industry, especially at a time when their own auto brands have long suffered from sluggish sales.”

He noted that Hyundai and Kia overstated the fuel efficiency ratings using many favorable factors to test their vehicles, but they would not be the only ones to do so.

“Many auto brands would have promoted their vehicles with excellent fuel economy, based on the tests that are conducted under favorable conditions” he said. “But the difference seems to be that Hyundai and Kia have been growing so fast in the past few years.”

In fact, there have been similar attempts to put the brakes on the global growth of Hyundai and Kia.

A few months ago, France claimed that its domestic auto market has been damaged by a surge in imports of Korean vehicles and requested the European Union to put Korean vehicles on a prior surveillance list, which could trigger safeguard measures against imports from Korea in the worst-case scenario.

Although EU decided not to accept the claim, market insiders believe that Korean automakers will face similar hurdles as they increase their presence overseas.

“We need to see the overstated fuel economy scandal from various points of view,” said Kim Pil-soo, a professor of automotive studies at Daelim University. “Of course, Hyundai and Kia made a mistake this time, but through this experience, they should know that their fast growth can intimidate competitors, and they may face harsh consequences from mistakes.”

Other experts also echoed Kim’s view, by saying that it takes many years to earn trust from customers but real damage can be done almost overnight.

“If you increase your presence in the market to a certain level, especially overseas, you’d better prepare for these sorts of scandals that can drag you down,” said Bok Deuk-kyu, researcher at Samsung Economic Research Institute. “You need to achieve quality at the top level. Otherwise, you can become an easy target.” <The Korea Times/Kim Tae-jong>