Hyundai Pays $210 Million To End Fuel Economy Litigation

Well, maybe the EPA will finally give Hyundai its due as the most fuel efficient company in the United States after the Korean automaker settled a court case over inflated fuel economy numbers.

Hyundai Motor America announced that it has entered into an agreement with current and former owners and lessees of vehicles affected by the automaker’s November 2012 restatement of fuel economy ratings. The adjustment affected approximately 27 percent of Hyundai 2011-13 model year vehicles, reducing their combined city/highway fuel economy by 1-2 mpg.

Over the course of 10 years, a Hyundai Elantra owner, for example, could expect to receive $721.46 based on Hyundai's projections. Apparently instead of receiving annual payments over 10 years, the owner will get the cash upfront.

As you may recall, the Environmental Protection Agency refused to name Hyundai the most fuel-efficient car line in the United States because of the restatement of the fuel economy ratings. This was in spite of Hyundai admitting to the mistake, fixing it, and compensating owners.

Hyundai says procedural errors at its testing operations in Korea resulted in overstated fuel economy ratings for approximately 600,000 Hyundai vehicles sold (about a third total) between 2010 and 2012. Kia is also affected by the settlement. Hyundai said the procedural error occurred when assessing each vehicle’s “coastdown” value. Coastdown testing is used to measure all types of resistance encountered by a vehicle during real-world operation, including aerodynamic, tire rolling and drivetrain resistance, or frictional losses. It was during this process that its testing operations made the procedural errors.

While the settlement agreement is valued at up to approximately $210 million, that number is dependent on how many customers elect to participate in the settlement’s one-time lump sum payment option or remain in the lifetime reimbursement program Hyundai introduced at the time of the restatement.

“We are pleased with the proposed settlement,” said W. Gerald Flannery, general counsel of Hyundai Motor America. “It demonstrates the ongoing Hyundai commitment to taking care of its customers.”

At the time of the restatement in 2012, Hyundai provided a lifetime reimbursement program to cover the additional fuel costs associated with the rating change – plus a 15 percent premium in acknowledgment of the inconvenience to customers. Affected owners and lessees are compensated based on their actual mileage and the fuel costs for the region in which they live.

“Customers responded favorably to the original reimbursement program,” added Flannery. “Today’s settlement is designed to provide them with an option, again intended to make customers fully whole for Hyundai’s fuel economy ratings restatement.”

To address plaintiffs’ claims including the requirement to return to a dealership for mileage verification, which plaintiffs felt could deter participation in the reimbursement program, Hyundai agreed to add a lump sum payment option. The proposed cash lump sum amount, which varies by vehicle model and ownership type, will result in an average estimated payment of $353 to Hyundai owners and lessees.

For example, an owner of a 2012 Elantra would receive a lump sum payment of $320 minus any previous reimbursement payments. Affected Hyundai owners may elect the one-time lump sum cash payment or remain in the automaker’s lifetime reimbursement program; the choice is theirs.

Consumers can also elect other options, such as a dealership credit of 150 percent of the lump sum cash payment amount, or a credit of 200 percent of the cash amount toward the purchase of a new Hyundai vehicle.

“Hyundai’s willingness to create a way for its customers to receive all of their future extra fuel expenses in a lump sum shows they are serious about making things right for their customers,” said Rob Carey, a Hagens Berman partner working on the case. “Hyundai stepped up – and its customers will now get a full recovery without the inconvenience of repeated dealership visits and paperwork.”

The Court is expected to review the proposed settlement for preliminary approval in early 2014. Assuming preliminary approval is granted, notices will be sent to individual class members. Initial details of the settlement are available now at www.hyundaimpginfo.com. A more in-depth website dedicated to the settlement will be established following preliminary approval by the Court.

About Hyundai and Kia Fuel Economy Litigation, MDL No. 2424
Following disclosure of the fuel economy ratings discrepancy in November 2012, approximately 53 federal complaints were filed against Hyundai and Kia and later consolidated (In re: Hyundai and Kia Fuel Economy Litigation, MDL No. 2424) in United States District Court for the Central District of California before Judge George H. Wu.