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Hyundai, Kia propose settlement of U.S. fuel economy lawsuits

A view shows the logo of a Kia car in its factory in Zilina, 200 kilometres north of Bratislava October 3, 2012. REUTERS/Petr Josek
A view shows the logo of a Kia car in its factory in Zilina, 200 kilometres north of Bratislava October 3, 2012. REUTERS/Petr Josek

DETROIT (Reuters) - U.S. units of South Korean sister companies Hyundai Motor Co <005380.KS> and Kia Motors Corp <000270.KS> on Monday said they reached an agreement to pay a total of $395 million to settle lawsuits filed by owners of cars affected by the companies' overstatements of fuel economy ratings.

The agreement would affect American owners of about 600,000 Hyundai and 300,000 Kia vehicles from the 2011 to 2013 model years.

In November 2012, the two companies conceded that they overstated fuel economy by at least a mile per gallon on vehicles after the U.S. Environmental Protection Agency found errors for 13 Hyundai and Kia models from the 2011 to 2013 model years.

Hyundai and Kia both gained bigger shares of the U.S. new-vehicle market in the past decade, particularly during the economic downturn of 2008 to 2010 when consumers saw bargains in their lineups of fuel-efficient and relatively low-priced vehicles.

The amount each company pays out will depend on how many owners opt for a one-time payment rather than participate in a "lifetime reimbursement" program in which owners get debit cards to pay them for the difference between actual fuel economy and what the company stated.

Hyundai estimates that the lump-sum payments will cost about $210 million, and for Kia the figure is $185 million.

Hyundai estimated that the average lump sum payment would on average be $320 minus any previous reimbursement payments received.

Hyundai and Kia sales in the U.S. market have been pressured by capacity constraints at its North American plants. Hyundai U.S. sales through November are up 2.2 percent, well below the 8.4 percent gain by the overall U.S. new vehicle industry, while Kia's U.S. sales have fallen 3.3 percent through November, according to Autodata Corp.

Brad Benson, president of a Hyundai dealership in South Brunswick, New Jersey, said the fuel economy issue has not had a major impact.

"Hyundai handled the initial settlement well (last fall). We've had no issues with customers," Benson said on Monday.

Hyundai's share of the U.S. market has fallen to 4.6 percent this year, from 4.9 percent a year ago, and Kia's U.S. market share of 3.5 percent is down from 3.9 percent a year ago.

The proposed settlement will go to the plaintiffs of the 53 U.S. lawsuits filed, which were later consolidated. If the plaintiffs accept the settlement, it will then go up for approval by the U.S. District Court for the Central District of California.

The proposed settlement does not affect class-action cases brought in Canada. Hyundai spokesman Chad Heard in Canada said Hyundai hopes that a proposed settlement to those cases can be reached in early 2014.

(Reporting by Bernie Woodall; Editing by David Gregorio and Leslie Adler)

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