Hyundai Proposes Settlement

Americans are serious about their horsepower, and that could cost Hyundai Motor Corp. more than $85 million.

The South Korean automaker has proposed paying about that much, plus attorney fees, to settle a class-action lawsuit accusing it of overstating the horsepower on cars exported to the U.S.

The plaintiffs are about 840,000 Hyundai and Kia owners who purchased 1996 to 2002 model year vehicles with engine power overstated by as much as 10%. Hyundai holds controlling interest in Kia Motors Corp. and supplied engines for some Kia models.

Executives at Fountain Valley-based Hyundai Motor America Inc., the company’s U.S. distribution arm, said in September 2002 that the company had failed to adjust numbers for the South Korean-built engines to account for the power-robbing effect of U.S. emissions controls.

At the time, Hyundai said 1.3 million vehicles were involved. Although some vehicles had more horsepower than advertised, most had less, with errors ranging from just a few horsepower on smaller four-cylinder engines to 20 horsepower on larger six-cylinder engines.

Hyundai offered extended warranties and roadside assistance plans to make up for what Finbarr O’Neill, then-president of the American unit, called an inadvertent error. But class-action suits alleged that the company deliberately overstated engine power to influence prospective buyers.

The company believed it had settled the suits last year when it hammered out a deal in a Texas case to provide free oil changes or price discounts on new vehicles to owners of affected cars and sport utility vehicles. The settlement was overturned by the court at the urging of attorneys handling a competing case in California.

The settlement proposal involves that suit -- a consolidated class action filed in Orange County Superior Court in September 2002 that wraps together seven cases.

In letters sent to owners this month, Hyundai offered prepaid debit cards good at various retailers and valued at $50 to $225, or shopping cards worth $100 to $325 good for parts or service at Hyundai dealerships. The size of the payment depends on the degree to which a vehicle’s horsepower was inflated.

The largest group of car owners consists of 459,000 people with 1999 to 2002 Hyundai Elantra sedans and 1997 to 2001 Tiburon sport coupes. Horsepower in those models was overstated by 2.5% to 3.9%.

Daniel Girard, the San Francisco attorney for the plaintiffs, said a ruling on the settlement was expected at a June 16 hearing in Santa Ana.