Hyundai Motor and Kia Motors are facing a U.S. criminal investigation over whether their vehicle recalls were carried out properly, according to a person with direct knowledge of the matter and documents reviewed by Reuters.
The probe, led by the U.S. Attorney’s Office for the Southern District of New York and coordinated with the National Highway Traffic Safety Administration, could still end without charges. But if prosecutors do proceed, the companies could face significant fines.
Nicole Navas Oxman, a Justice Department spokeswoman, declined to discuss the matter. In an emailed statement, she said the department “generally does not confirm, deny or otherwise comment on the existence or non-existence of an investigation.”
The scrutiny comes on top of earlier recall actions tied to engine failures. Hyundai and Kia recalled nearly 1.7 million vehicles in the United States in 2015 and 2017, citing a defect that raised crash risk. Hyundai recalled 470,000 Sonata sedans in 2015 over Theta II engine failures, then expanded the action in 2017 to cover 572,000 Sonata and Santa Fe sport utility vehicles. Kia also recalled 618,160 Optima, Sorento and Sportage vehicles using the same engine.
The NHTSA said it still had “active” investigations into engine issues involving certain Hyundai and Kia vehicles and that no final conclusions had been reached. A former Hyundai engineer, Kim Gwang-ho, told the regulator the companies should have recalled more vehicles in 2015, citing an internal report.
Hyundai and Kia have already set aside about 1 trillion won, or $885 million, in 2017 and 2018 to cover costs mainly linked to engine-related recalls. The companies, which together rank among the world’s largest automakers, are also under pressure from weak business in China and the United States.
Investor concern deepened after data from the China Passenger Car Association showed passenger car retail sales in China fell 32 percent in the first 16 days of November. Hyundai shares fell 5 percent to their lowest level in more than nine years, while Kia also dropped 5 percent. Hyundai Mobis lost about 9 percent and Hanon Systems fell 5 percent.
Analysts said the investigations could damage the brands as well as raise costs. Nomura analyst Angela Hong said investors were worried the probes could bring more recall expenses and fines while hurting sales and brand image.
The case also recalls earlier U.S. enforcement against other automakers. Toyota Motor reached a $1.2 billion settlement after admitting it had misled the public about sudden unintended acceleration, while Volkswagen later paid $4.3 billion in fines after admitting diesel emissions fraud.
Hyundai declined to comment on the U.S. investigation and on China sales.
