Seoul October 18 2022: Hyundai Motor Co. and affiliate Kia Corp. will reflect provisions totaling 2.9 trillion won ($2 billion) in their third-quarter earnings as problems relating to their Theta GDI engine continue to weigh on the South Korean automakers.
Hyundai will set aside 1.3 trillion won and Kia’s cost provision will be 1.54 trillion won, the companies said. That accounts for 44% and 66% of their estimated operating profits for the third quarter, respectively, according to data compiled by Bloomberg.
Hyundai and Kia recalled as many as 1.2 million vehicles in the US in 2017 due to engine issues, setting aside 3.36 trillion won in provisions in 2020 because of costs related to a 2019 settlement of a class-action lawsuit brought by American drivers over an alleged defect that caused certain engines to catch fire.
Hyundai said in a statement Tuesday that car owners had claimed for replacement Theta engines at a higher rate than expected since 2020 as part of the carmaker’s lifetime service warranty for the problematic part. As well, people probably held off on buying new cars during the pandemic and with supply chains disrupted and the Korean won at historically weak levels, there were higher associated warranty costs.
About 2.4 million Hyundai vehicles and 1.8 million Kia cars are affected, according to a statement posted on Hyundai’s website Tuesday.
The costs will be set aside to improve vehicle quality and safety, the companies said in filings released after the stock market closed in Seoul, adding that they will endeavor to restore consumer trust.
