Hyundai and Kia move to recall cars

Hyundai Motor and Kia Motors plan to recall 1.48-million vehicles in the US, Canada and South Korea because of engine issues, the latest blow for two companies already struggling in key markets.

The recall revives quality concerns at a time when Hyundai and Kia face a sharp drop in Chinese sales and sluggish demand in the US and South Korea.

The South Korean companies are recalling 1.19-million cars and sport utility vehicles in the US, 114,187 in Canada and 171,348 in South Korea as a result of an engine issue that increases the risk of a crash, according to safety regulators in those countries.

The US recall involves Hyundai’s Sonata and Santa Fe and Kia’s Optima, Sorento and Sportage models.

The recall could hit earnings, with the recall costing each company as much as 250billion won ($220.19m), said Koh Tae-bong, an analyst at Hi Investment & Securities.

The two companies declined to comment on the cost of the recall.

THIS IS NOT THE FIRST TIME HYUNDAI AND KIA HAVE BEEN FORCED TO RECALL VEHICLES DUE TO ENGINE DEFECTS

On Friday, Hyundai Motor shares closed 2.4% weaker in Seoul, compared with a flat broader market. Kia Motors shares lost 0.9%.

This is not the first time Hyundai and Kia have been forced to recall vehicles due to defects in their Theta engines, which they manufacture themselves. In 2015, Hyundai Motor recalled 470,000 Sonata sedans in the US to replace faulty engine parts, prompting quality concerns in its home market of South Korea.

But Hyundai and Kia said in 2016 that engines produced at domestic factories were not defective. They instead extended the warranty period for five Theta 2-equipped models in South Korea.

South Korea’s transport ministry said on Friday that metal debris in crankshafts could cause engine damage, leading to a possible loss of motive power.

The recall in South Korea covered Hyundai’s Sonata and Grandeur sedans and Kia’s K5, K7 and Sportage models equipped with a 2-litre or 2.4litre Theta 2 petrol engine produced before August 2013, the ministry said.

“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.

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