DETROIT (CBSMiami/AP) — Hyundai and Kia have some explaining to do after the Environmental Protection Agency uncovered the companies overstated gas mileage on nearly 1 million vehicles during an audit of mileage tests.
The findings could result in sanctions from the U.S. government and millions of dollars in payments to car owners from the two South Korean automakers.
The EPA, which monitors fuel economy, said Friday that it's investigating how the companies came up with their numbers.
The EPA found inflated gas mileage on 13 models from the 2011 through 2013 model years, including Hyundai's Elantra and Tucson, and Kia's Sportage and Rio. The window sticker mileages were overstated on about one-third of the cars sold by the companies during the three years.
As a result, Hyundai and Kia will have to knock one or two miles per gallon off the vehicle stickers of most of their models. Some models will lose three or four miles per gallon. The Kia Soul, a funky-looking boxy small SUV, will lose six from its highway figure, lowering it from 34 mpg to 28 mpg.
"Consumers rely on the window sticker to help make informed choices about the cars they buy," said Gina McCarthy, assistant administrator of the EPA's air-quality office. "EPA's investigation will help protect consumers and ensure a level playing field among automakers."
The agency would not comment when asked if the companies will be fined or if a criminal investigation is under way. Hyundai and Kia are owned by the same company and share factories and research, but they sell different vehicles and market them separately.
The reduced mileage figures are a black eye for the companies, which have seen explosive sales growth in the U.S. partly because of advertising campaigns that touted gas mileage. Hyundai even poked fun at competitors who promoted special high-mileage versions of their cars, claiming that its cars had high mileage across the model lineup.
The EPA said it's the first case in which erroneous test results were uncovered in such a large number of vehicles from the same manufacturer. Only two similar cases have been discovered since 2000, and those involved single models.
Company executives apologized for the discrepancies and promised to compensate customers because they're using more gasoline than expected. The executives said the higher mileage figures were unintentional, caused by errors in following EPA mileage test procedures. The customer payments are likely to cost Hyundai and Kia millions of dollars.
The EPA testing requirements are specific enough so the companies should have been able to come up with accurate results, said Naeim Henein, director of the Center for Automotive Research at Wayne State University in Detroit. "This might have been a mistake or intentional," he said. "Nobody knows until the investigation."
An examination of test results should show the EPA if the figures were raised intentionally or by errors, Henein said. Intentionally boosting mileage figures is a crime, he said.
Intentional or not, overstating the mileage could cut into Hyundai and Kia sales, especially with people who are deciding between brands and ready to buy soon, said Jesse Toprak, vice president of market intelligence for the TrueCar.com auto pricing website. But in the long run, the brands still offer good value for the money, even with lower mileage numbers, he said.
"I don't think it's going to be necessarily a major hit. It's probably going to be a speed bump," Toprak said.
The EPA said it began looking at Hyundai and Kia when it received a dozen complaints from consumers that the mileage of their 2012 Elantra cars fell short of the window sticker numbers. The EPA included the Elantra in an annual fuel economy audit, and that led to the investigation.
Automakers do their own mileage tests, following procedures set by the EPA, and the agency enforces accuracy by auditing about 15 percent of vehicles annually.
Other automakers are closely watching the EPA's action against Hyundai and Kia, said Alan Baum, an auto industry consultant from suburban Detroit who deals with fuel economy regulations.
"This will send kind of a warning to the automakers that if there's a consumer reaction to these fuel economy numbers, that the EPA will act," he said.
John Krafcik, Hyundai's CEO of American operations, said the companies are sorry for the errors. "We're driven to make this right," he said Friday.
Michael Sprague, executive vice president of marketing for Kia Motors America, said the companies have a program in place to reimburse customers for the difference between the mileage on the window stickers and the numbers from the EPA tests.
Dealers will find out how many miles the cars have been driven and figure out the increased cost to owners due to the lower gas mileage.
For example, a customer in Florida whose car got 26 miles per gallon instead of 27 and drove 15,000 miles would wind up using 21.4 more gallons because of the inflated mileage. At a local gas price of $3.59 per gallon, the companies would pay them $76.83. Hyundai and Kia are adding a 15 percent premium for the inconvenience, so the customer would get about $88.
The payments would be made by debit cards that can be refreshed every year as long as the person owns the car, Sprague said.
If all 900,000 owners get $88, it would cost the automakers more than $79 million a year.
Hyundai will have to cut two mpg from the 2012 Elantra's 40 mpg highway mileage because of the EPA audit. The two-wheel-drive 2013 Santa Fe SUV with a 2.4-liter engine and automatic transmission was supposed to get 33 mpg on the freeway, but that will drop to 29. And the 2013 Soul with a 2-liter engine and automatic transmission will lose six mpg from its highway mileage.
Sung Hwan Cho, president of Hyundai's U.S. technical center in Michigan, said the EPA requires a complex series of tests for fuel economy, and results can vary in a number of procedures. "These were just honest procedural errors," Cho said.
Engineers did the tests as the companies were making a large number of changes in their cars designed to improve mileage, and the changes further complicated the tests, Cho said. There are hundreds of test parameters, most of which are spelled out by EPA regulations, but "there's also some points where we also need some interpretation," he said.
Krafcik said the companies have fixed testing procedures and are replacing window stickers on cars in dealer inventories. Owners can be confident in their mileage stickers now, he said, adding that Hyundai will still be among the industry leaders in gas mileage.
Through October, Hyundai sold 590,000 vehicles in the U.S., up 30 percent in two years. Kia sold more than 477,000, an increase of almost 60 percent. Strong warranties and improved styling, technology and quality have vaulted them into serious competition with larger auto companies.
(TM and © Copyright 2012 CBS Radio Inc. and its relevant subsidiaries. CBS RADIO and EYE Logo TM and Copyright 2010 CBS Broadcasting Inc. Used under license. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. The Associated Press contributed to this report.)
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