Engine Issues Force Hyundai, Kia To Recall Nearly 1.5 Million Vehicles

In what is being considered to be the latest blow for two firms already struggling in key markets, engine issues have forced Hyundai Motor Co and Kia Motors Corp to plan to recall 1.48 million vehicles in the United States, Canada and South Korea.

At a time when Hyundai and Kia face a sharp drop in China sales and sluggish demand in the United States and South Korea, the recall could cost the two firms hundreds of millions of dollars each and would revive quality concerns about the products of the companies.

According to safety regulators in the respective three countries stated along with, due to the engine issue that increases the risk of a crash, the two South Korean companies are recalling 1.19 million cars and sport utility vehicles in the United States, 114,187 in Canada and 171,348 in South Korea.

Kia’s Optima, Sorento and Sportage models and Hyundai’s Sonata and Santa Fe are involved in the U.S. recall.

Koh Tae-bong, an analyst at Hi Investment & Securities said that the recall could hit earnings with the recall costing each company as much as 250 billion won ($220.19 million).

The companies declined to comment on the cost of the recall.

Compared to a flat broader market, Kia Motors were down 0.9 percent and Hyundai Motor shares closed down 2.4 percent.

Due to defects in their Theta engines, which they manufacture themselves, there have been earlier occasions also when Hyundai and Kia have been forced to recall vehicles.

Quality concerns in its home market of South Korea were prompted when Hyundai Motor recalled 470,000 Sonata sedans in the United States to replace faulty engine parts in 2015.

Engines produced at domestic factories were not defective, Hyundai and Kia had said last year. Instead in South Korea, the companies extended the warranty period for five Theta 2-equipped models.

Metal debris in crankshafts could cause engine damage, leading to possible loss of motive power, South Korea’s transport ministry said on Friday.

The ministry said that Kia’s K5, K7 and Sportage models and Hyundai’s Sonata, Grandeur sedans with a 2-liter or 2.4-liter Theta 2 gasoline engine produced before August 2013 are included in the recall of the cars of the two companies in South Korea.

“The recall is related to a manufacturing process problem, not the structural problem of Theta 2GDi engines and we have completed improvements through appropriate measures,” the companies said in a statement.

After inspection, a defective engine will be replaced with a new one by Hyundai.  The recall in South Korea will start on May 22.

(Adapted from Reuters)

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