Kia Motors earmarks $187 million in costs on false U.S. mileage claims
Hyundai and Kia set aside combined $412 million to compensate N.A. customers
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SEOUL -- Kia Motors has set aside provisions of about 200 billion Korean won ($187.13 million) to compensate drivers in North America for its overstated fuel-economy claims, Joo Woo-jeong, a director at the automaker, said today.
Hyundai Motor and its affiliate Kia Motors conceded early November that they overstated the fuel economy on more than 1 million recently sold vehicles in the United States and Canada, and agreed to compensate owners for the additional fuel costs.
Hyundai said on Thursday it has earmarked 240 billion won ($225 million) to cover the compensation costs, bringing the total costs for the affiliated automakers so far to more than $412 million.
Hyundai and Kia posted disappointing results for the December quarter, hit by the stronger local currency and costs to compensate drivers for false mileage claims, sending their shares tumbling on Thursday and Friday.
Kia reported a 51 percent slump in operating profit and said it expects a "difficult year."
Fourth-quarter operating income tumbled to 404.2 billion won ($377 million) from 826.9 billion a year earlier, the company said in a regulatory filing today. That was 35 percent below the average estimate of 621.4 billion won in a Bloomberg survey of seven analysts. Net income fell 6.7 percent to 737.5 billion won.
The automaker's results underscore how South Korean exporters, including Hyundai, are bracing for the end of a four-year period of favorable exchange rates.
"The results were far worse than I had expected," Lee Sang Hyun, an analyst at NH Investment & Securities Co. said by phone. "I don't think we can expect profitability to improve anytime soon."
Kia fell 4.9 percent to 49,750 won at the close in Seoul trading, the lowest since November 2010. The benchmark Kospi index declined 0.9 percent.
Reuters and Bloomberg contributed to this report.
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