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Nov. 3 — Automakers Kia Motors Corp. and Hyundai Motor Co. agreed to pay a $100 million penalty and forfeit nearly $200 million in credits after overstating the fuel economy of several models of vehicles, the Environmental Protection Agency and Justice Department announced Nov. 3.
The proposed civil penalty is the largest fine ever levied under the Clean Air Act, the administration said.
The vehicles did not exceed the EPA's greenhouse gas emissions standards, which are expressed as fuel economy improvements, but the automakers are accused of overstating the performance of 1.2 million model year 2012 and 2013 vehicles by as much as 6 miles per gallon. That resulted in emitting 4.75 million metric tons of greenhouse gases more than they were certified for by the EPA.
“They claimed more greenhouse gas emissions credits than they were entitled to, and they touted these inaccurate statistics to consumers,” Attorney General Eric Holder said during a press conference.
The Justice Department and California Air Resources Board filed a joint civil complaint and a proposed consent decree with the companies Nov. 3 (United States v. Hyundai Motor Co.,D.D.C., No. 1:14-cv-1837, consent decree filed 11/3/14).
The proposed consent decree will need to be approved by a district court judge following a public comment period before it takes effect.
“It's important to remember this settlement is about EPA having a robust audit process. We identified this misstatement of the fuel economy very early in the model year,” EPA Administrator Gina McCarthy said during the press conference.
Model year 2012 vehicles were the first required to comply with the joint corporate average fuel economy (CAFE) and greenhouse gas emissions standards issued by the EPA and National Highway Traffic Safety Administration. Automakers are required to provide the EPA with vehicle testing data showing they achieve the advertised fuel economy in order to receive certificates of conformity to sell their cars and trucks.
The EPA in 2012 spotted discrepancies with the fuel economy advertised by Kia and Hyundai in a significant portion of their vehicles and the performance that was achieved during auditing. The agency ordered the companies to update the advertised fuel economy to reflect actual performance.
Shortly after that, Hyundai announced a lifetime reimbursement program to cover additional fuel costs customers incurred as a result of the inaccurate fuel economy labeling.
“Hyundai has acted transparently, reimbursed affected customers and fully cooperated with the EPA throughout the course of its investigation,” David Zuchowski, president and chief executive officer of Hyundai Motor America, said in a Nov. 3 statement. “We are pleased to put this behind us, and gratified that even with our adjusted fuel economy ratings, Hyundai continues to lead the automotive industry in fuel efficiency and environmental performance.”
Kia also announced its own reimbursement program after the discrepancies were discovered.
“We are pleased to have this matter behind us, and our priority remains making things right for our customers through our fair and transparent reimbursement program which remains in effect and unchanged by this settlement,” the company said in a statement.
The $100 million civil penalty is a record for fines brought under the Clean Air Act.
The largest individual fines previously levied under the Clean Air Act were against Cummins Engine Co. Diesel Engine and Caterpillar Inc., each of which were subject to $25 million penalties, according to the EPA. The two companies were both a part of a 1998 settlement, where several diesel manufacturers were subject to a cumulative $83.5 million in civil fines for installing rigged computer chips into 1.1 million diesel trucks and circumventing air pollutant emission requirements.
The proposed consent decree requires Hyundai to surrender 2.7 million greenhouse gas emissions credits for overstating the performance of its vehicles, while Kia will lose more than 2 million credits. In addition to paying the penalties and forfeiting greenhouse gas credits, the companies have already agreed to improved testing procedures, which will cost the companies another $50 million.
“Companies have to make sure they have within themselves a culture of compliance,” Holder said.
The vehicle rule was the EPA's first climate change regulation, and McCarthy said the auditing program is vital to ensuring the required emissions reductions are being achieved.
“This case and this settlement actually delivers on the commitment of that rulemaking,” she said.
The EPA has required other car manufacturers to make small adjustments to the reported fuel economy of their vehicles as well. Most recently, the EPA ordered Mercedes-Benz to reduce its advertised city driving fuel economy of its 2012 and 2013 C300 4-Matic FFV from 20 miles per gallon to 19 mpg.
However, McCarthy said the violations by Hyundai and Kia were more severe and systemic.
“What you see here is by far the most egregious case we've identified,” she said.
Violations included testing the vehicles at temperatures intended to maximize fuel economy, using the wrong size tires on testing vehicles and testing with a tail wind, administration officials said.
To contact the reporter on this story: Andrew Childers in Washington at firstname.lastname@example.org
To contact the editor responsible for this story: Larry Pearl in Washington at email@example.com
The civil complaint against Kia Motors Corp. and Hyundai Motor Co. is available at http://www.bloomberglaw.com/public/document/UNITED_STATES_OF_AMERICA_et_al_v_HYUNDAI_MOTOR_COMPANY_et_al_Dock.
The proposed consent decree is available at http://www.bloomberglaw.com/public/document/UNITED_STATES_OF_AMERICA_et_al_v_HYUNDAI_MOTOR_COMPANY_et_al_Dock/1.
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