Hyundai, Kia Plan Major Car Recall Over Engine Issue

Industries Reuters

The logo of Hyundai Motor is seen on a wheel of a car at a Hyundai dealership in Seoul (Copyright Reuters 2017)

Hyundai Motor and Kia Motors  are expected to recall more than a million vehicles in South Korea and the United States due to engine issues, the latest blow for two firms already struggling in key markets.

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The recall, which could cost the two firms hundreds of millions of dollar each, comes as Hyundai and Kia face a sharp drop in China sales and sluggish demand in the United States and South Korea.

The two car companies said on Friday they will recall 171,348 vehicles in South Korea because of a manufacturing problem, which leads to possible engine stalling.

The South Korean automakers have also submitted plans to U.S. authorities to recall an unidentified number of vehicles in the United States over a "similar" engine issue, a spokesperson at the South Korean duo said.

Yonhap News Agency, citing Hyundai, said the U.S. recall would reach some 1.3 million vehicles, an amount close to the duo's annual U.S. sales.

The U.S. recall alone could cost the companies as much as 250 billion won ($220.19 million) each, hitting earnings, said Koh Tae-bong, an analyst at Hi Investment & Securities.

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A Hyundai official declined to confirm to Reuters the expected cost of the U.S. recall, nor the number of vehicles involved.

The recall helped push Hyundai Motor shares lower by as much as 2.7 percent, compared to a 0.4 percent decline in the broader market. Kia Motors were down 1.1 percent.

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POSSIBLE ENGINE STALLING

The recall in South Korea covers Hyundai's Sonata, Grandeur sedans and Kia's K5, K7 and Sportage models equipped with a 2-liter or 2.4-liter Theta 2 gasoline engine produced before August 2013, the South Korean transport ministry said.

The ministry said metal debris in crankshafts could cause engine damage, leading to possible engine stalling.

"The recall is related to a manufacturing process problem, not the structural problem of Theta 2GDi engines and we have completed improvements through appropriate measures," the companies said in a statement.

Hyundai will replace a defective engine with a new one after inspection. The recall will start on May 22.

In 2015, Hyundai Motor said it would recall 470,000 Sonata sedans in the United States to replace faulty engine parts, sparking questions of safety back home.

But Hyundai and Kia has said that engines produced at domestic factories were not defective. They instead extended the warranty period for five Theta 2-equipped models in South Korea.

The Hyundai spokesperson said the latest recall involves a new problem.

($1 = 1,135.4000 won)

(Reporting by Hyunjoo Jin; Editing by Randy Fabi)