Mileage fiasco: Hyundai, Kia shares dive
Hyundai Motor Co's and Kia Motors Corp's admission that they overstated the fuel economy of some cars will be a crucial test for the two, and may taint the reputation of the automakers that had enjoyed a decade of unbroken success in the United States.
Shares in the two South Korean automakers tumbled 7 percent on Monday as investors fretted about the blow to their brands, the potential for lawsuits, as well as the cost of compensating customers.
The overstating affects more than a million vehicles. The U.S. Environmental Protection Agency (EPA) found the errors in 13 Kia and Hyundai models from the 2011 to 2013 model years.
Hyundai and affiliate Kia said on Friday the errors stemmed from procedural differences in their mileage tests compared to the EPA tests. The automakers will reimburse current owners for extra fuel costs and issued a full-page newspaper ad for Sunday to apologise.
For some analysts, the news was potentially dire.
This could be a game-changing event in Hyundai's success story, said James Yoon, an analyst at BNP Paribas, said in a report. We think the potential financial loss is immaterial compared to the potential reputation loss of brand equity. But others noted that unlike damaging recall scandals that had affected rivals Toyota Motor Corp and Ford Motor Co , Hyundai and Kia had been quick to admit to mistakes and announce a compensation plan.
Those were more serious issues related to safety... Thus the impact on brand-value and U.S. sales may be
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