South Korea orders major Hyundai, Kia recall after whistleblower report

Fri May 12, 2017 6:09am EDT
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By Hyunjoo Jin

SEOUL (Reuters) - South Korea ordered Hyundai Motor Co (005380.KS: Quote) and affiliate Kia Motors Corp (000270.KS: Quote) to recall 240,000 vehicles over safety defects flagged by a whistleblower - a sharp slap on the wrist that will exacerbate reputational woes for the automakers.

The move marks the first compulsory recall ordered by the transport ministry for Hyundai and Kia, which had resisted an earlier request for a voluntary recall, and gives fresh credence to allegations made by Kim Gwang-ho, a Hyundai engineer with 26 years at the company.

The ministry has also asked prosecutors in Seoul to investigate whether the automakers allegedly covered up the five flaws, which affect 12 models, including the Elantra, Sonata, Santa Fe and Genesis.

Hyundai and Kia, which had previously argued that the flaws presented no danger to driving safety, said in a joint statement on Friday they would cede to the order.

They added there had been no reports of injuries or accidents due to the problems which include defects in parking brake warning lights, and denied that there had been any cover-up.

In the first whistleblower case to hit South Korea's auto industry, Kim has made allegations about 32 problems to local regulators. The latest recalls covers five of those problems.

Kim also flew to the United States last year to report safety lapses to authorities there and the automakers have since issued a voluntary recall for a combined 1.5 million vehicles in North America and in South Korea over a defect that could cause engines to stall.

"What the whistleblower said turned out to be true," said Samsung Securities auto analyst Eim Eun-young.   Continued...

FILE PHOTO - The logo of South Korean car manufacturer Hyundai is seen at a car dealer in Dietlikon, Switzerland October 11, 2016.  REUTERS/Arnd Wiegmann/File Photo