U.S. Fines Automakers Hyundai and Kia for Misstating Mileage
Korea
n automakers Hyundai Motor and Kia Motors will pay the federal government $300 million as part of a settlement for overstating vehicle fuel-economy standards on 1.2 million cars. The action is part of a broader, more aggressive enforcement effort by federal regulators on the auto industry. Under the agreement, automakers will pay $100 million in fines and forfeit an estimated $200 million in greenhouse-gas emissions credits, which auto companies earn by building vehicles with lower emissions than are required by law. Since all of the testing for these two companies was done entirely in Korea, government officials are also requiring the companies to build a separate, American based center for testing fuel economy as part of the settlement.
The admission came after an E.P.A. investigation into consumer complaints that their cars were underperforming the official mileage estimates of their new cars. The E.P.A. said the fuel efficiency standards reported by Hyundai and Kia were off by one to six miles per gallon. Hyundai and Kia both apologized for what they called "procedural errors" in testing.
How big of an impact, if any, do you believe that this news will have on sales for both Hyundai and Kia? Do you think this news could potentially benefit American made car companies? How prevalent do you think misstating mileage is in the auto industry?
Here's the article http://www.nytimes.com/2014/11/04/us/politics/us-fines-korean-automakers-for-misstating-mileage.html?ref=business
Automatically, I assume that the so-called "procedural errors" will negatively impact the companies' brand images and alter consumer confidence in their products. Cases similar to this have resulted in companies ultimately finding drops in revenue, units sold, and market share, simply because consumer's opinions on the company are compromised and they are driven to purchase competitor's products. I think that this could benefit American made car companies as the article stats that government officials are requiring companies to build separate, domestic testing facilities. Potentially this will be good for American auto business. I would also say that companies in the auto industry can get away with a lot simply off of testing that can allude to numbers that so fractionally allow companies to make certain claims. However, by making such claims they have to be able to own up to it; this situation in some regard reminds me of the GM ignition switch recall. Proper testing should be done to avoid "procedural errors" prior to making a hefty claim.
ReplyDeleteI also think that this could benefit United States automobile manufacturers. Mainly because of the aspect of the settlement that is requiring domestic testing centers. I think that this procedural error will adversely impact Hyundai and Kia to at least some extent. Many people buy Hyundais and Kias because of the fuel efficiency they offer, so this may really hurt their public images.
ReplyDeleteIn addition to helping United States automobile manufacturers, this would benefit jobs in America. New regulation stations in the United States would create new jobs for Americans. I think this could actually benefit sales for both Hyundai and Kia. This might sound ridiculous at first, but hear me out. I remember reading an article from the Harvard Business Review a year ago. The article focuses on admitting failure as a business. One extreme case of this is Domino's pizza. They revamped their entire pizza making process and management. I think admitting mistakes as a company and then changing what has made customers angry is what a business ethically and financially should do. It might hurt in the short-term, but it will force the business to create a stronger product in the long-term.
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