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Default Hyundai, Kia MPG Error Will Cost $100M: Moody’s

Hyundai and Kia are set to lose $100 million annually in the wake of the companies overstating, and now adjusting mpg claims on about 900,000 vehicles in the U.S., according to Moody’s Investor Services.

The companies are reducing the mpg numbers on their vehicles an average of 2 mpg, and will reimburse affected customers for the funds lost because of the over statement. The reimbursement plan is effective for the lifetime of the vehicle, and will also pay out to former owners of the cars in question.

“This incident will damage their brand recognition,” Moody’s told The Detroit News. “However, there will be no impact on the Baa1 ratings and stable outlooks, because Moody’s believes both companies have adequate financial cushions and the impact on their competitive positions will be manageable.”

Though the companies will be alright financially, ”the impact on the companies’ brand recognition and sales performance in North America could be more material, given that high fuel efficiency has been one of their key selling points and the region is the group’s largest market,” said Chris Park, Moody’s vice president and senior credit officer. ”The damage to the companies’ brand image and their sales performance in North America is unlikely to have a profound impact on their credit profile,” Park finished.

[Source: The Detroit News]

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