Company agrees to sweeping safety oversight under consent order with NHTSA

Hyundai fined $17.35 million by U.S. for delayed reporting of brake defect

Company agrees to sweeping safety oversight under consent order with NHTSA

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WASHINGTON -- Hyundai Motor Co. will pay a $17.35 million fine for failing to report a brake defect, and carry out a recall, in a timely fashion to U.S. regulators. The company also agreed to additional government oversight to better identify, report, and communicate safety-related defects, the National Highway Traffic Safety Administration said.

NHTSA said the automaker delayed a recall for a defect that can cause corrosion in the braking system of 43,500 Hyundai Genesis sedans from model years 2009-12.

The Genesis was recalled in October 2013 to repair a potential brake system component that could become corroded from incompatible brake fluid, resulting in reduced braking performance.

There have been no fatalities relating to the safety defect, but six consumers reported collisions, including two reports of injuries, NHTSA said.

While Hyundai notified its dealers, it didn’t tell vehicle owners about the safety issue, according to NHTSA.

“Hyundai failed to act to protect their customers and others that were harmed in an accident, and must change the way they deal with all safety-related defects,” said David Friedman, the agency’s acting administrator.

Hyundai issued a technical service bulletin in March 2013 to dealers to replace the brake fluid in affected vehicles, and ultimately conducted the recall after NHTSA opened of an investigation into the matter.

The company was first informed of the potential problem by a Korean supplier in 2012, after internal testing by the supplier, NHTSA said.

Automakers are required by federal law to report safety-related defects to NHTSA within five days.

As of Jan. 14, Hyundai had received 87 consumer complaints related to the Genesis vehicles, most of which suggest increased difficulty in braking, NHTSA said in a statement.

“Hyundai remains committed to making safety our top priority, and is dedicated to ensuring immediate action in response to potential safety concerns including the prompt reporting of safety defects,” David Zuchowski, CEO of Hyundai Motor America, said in a statement.  “In order to mitigate a situation like this in the future, Hyundai is instituting new organizational and process improvements, and enhancing the ability of the U.S. leadership team to readily respond to regulatory reporting requirements.”

Under a broad consent order between Hyundai and NHTSA, the company's U.S. arm has agreed to:

• Make decisions relating to the need for a safety recall in the United States market, independently and without approval, from its parent company in Korea.

• Form a U.S.-based technical committee to review and decide upon potential safety recalls and service campaigns.

• Give the head of the U.S. technical committee direct access to the board of directors of Hyundai Motor America and Zuchowski.

• Not delay holding any meeting of the technical committee or to decide whether or not to recommend or conduct a safety recall because Hyundai has not identified the precise cause of a defect, a remedy for the defect, or prepared a plan for remedying the defect.

• Work collaboratively with NHTSA to explore creative ways to increase recall response rates.

• Meet with NHTSA on a monthly basis for one year "to report, in a manner specified by NHTSA, on new technical service bulletins or other dealer communications, Hyundai’s decision-making associated with safety related or high warranty claims or potentially safety-related field reports, and any other actual or potential safety-related defects."

A majority of the Genesis models recalled have been repaired, Hyundai said.

The same brake component was used in General Motors vehicles, NHTSA said.

In January 2012 and again in September 2012, GM initiated a safety recall in 67 foreign countries to replace the brake fluid in vehicles that paired the suspect brake fluid with the same hydraulic electronic control unit used in the Hyundai Genesis, NHTSA documents show.

In November 2012, GM issued a technical service bulletin to U.S. dealers to replace the brake fluid, inspect the anti-lock brake module and replace it if necessary.

Hyundai's fine comes at a time when some U.S. lawmakers and highway safety advocates are calling for stiffer penalties for automakers, and in some cases criminal prosecution, for auto executives who are found to allow unsafe vehicles on the road.

Transportation Secretary Anthony Foxx, who oversees NHTSA, wants to raise the maximum fine for delaying a recall to $300 million from $35 million. He says current fines -- set by Congress -- are too low to serve as a deterrent.

“This administration will act aggressively and hold automakers accountable when they put the American public at risk,” Foxx said in a statement.

Following GM's delayed recall of 2.6 million vehicles with faulty ignition switches earlier this year, NHTSA has cracked down on automakers for failing to spot and report defects.

GM was fined a record $35 million by NHTSA for the delays and paid another $420,000 in fines for failing to answer questions about the recall by a deadline set by the agency. The company is also subject to additional safety oversight as part of a consent order with NHTSA.

David Phillips and Reuters contributed to this report.

 

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