WASHINGTON (Reuters) - Korean carmakers Hyundai Motor and affiliate Kia Motors will pay US$350 million (S$451.50 million) in penalties to the U.S. government for overstating fuel economy ratings in what officials said on Monday was the biggest settlement of its kind.
The deal comes on top of US$395 million the automakers agreed to pay last December to resolve claims from the owners of the vehicles, bringing the companies' total cost for the mileage overstatements to more thanUS $700 million.
Monday's settlement with the US Environmental Protection Agency, the U.S. Department of Justice and the California Air Resources Board resolves an investigation of the South Korean carmakers' 2012 fuel economy ratings.
The penalties were the largest ever under the Clean Air Act.
"This will send an important message to automakers around the world that they must comply with the law," said Attorney General Eric Holder.
Under the accord, which involved the sale of 1.2 million cars and SUVs, the South Korean car firms will pay a US$100 million penalty, spend around US$50 million to prevent future violations and forfeit emissions credits estimated to be worth more than US$200 million.
In November 2012, Hyundai and Kia conceded they overstated fuel economy by at least a mile per gallon on vehicles after the EPA found errors for 13 Hyundai and Kia models from the 2011 to 2013 model years. Hyundai said at the time that the affected cars' reported fuel economy would be adjusted by 1 to 2 miles per gallon.
Hyundai shares fell as much as 4.4 per cent in trading in Seoul on Tuesday, extending a slide that has dragged them to their lowest in over four years.
The decline also knocked Hyundai from its perch as South Korea's second-most valuable company after Samsung Electronics, a spot it had held since March 29, 2011.
Hyundai and Kia both increased their shares of the US new-vehicle market in the past decade, particularly during the economic downturn of 2008 to 2010 when consumers craved fuel-efficient and relatively low-priced vehicles.
However, Hyundai has lost US market share in the past couple of years, as US and Japanese rivals made a comeback.
Hyundai said on Monday that its US vehicle sales fell 7 per cent in October from a year earlier, lagging the market's 6 per cent gain, with weaker sales of the Sonata sedan offsetting demand for its Santa Fe sports utility vehicles. Kia's U.S. shipments rose 12 per cent in October.