Hyundai's fuel mileage fiasco

Hyundai Motor Co's admission that it overstated fuel economy claims on several of its top-selling cars has the industry worried, with speculation rife among executives and analysts at the Los Angeles auto show that more automakers may have to do the same.

Four weeks ago, Hyundai and its affiliate Kia Motors Corp conceded that they overstated the fuel economy by at least a mile per gallon on more than one million recently sold vehicles.

"I think we might see more of this," said Jake Fisher, the head of automotive testing at Consumer Reports. "There are other vehicles that don't really stack up to the EPA estimates."

Hyundai, which had centered marketing campaigns on superior fuel economy, says that so far its US sales have not been affected by the admission. But it has had to implement a compensation campaign that Moody's Investors Service estimates could cost them $100 million a year until the cars are scrapped. It also faces lawsuits over the matter.

It only makes sense for the industry to come under scrutiny, said Gary Silberg, KPMG national auto industry leader.

"We're from an auditing firm. What you learn in auditing is that if you find one outlier you have to test some more," said Silberg. "It would be my guess that there are others."

Automakers too noted the pressure.

"I think every manufacturer did what we did and went back and said: 'Are these real numbers?'" said Al Castignetti, vice president of Nissan Motor Co's namesake brand in the United States.

Castignetti, and auto executives at General Motors Co , Toyota Motor Corp, Honda Motor Co, Mazda Motor Corp, Chrysler Group LLC and Fiat SpA's North American arm, all said they are confident that their mileage claims are true.

A tricky issue

Measuring fuel economy can be tricky – an issue well highlighted by Ford Motor Co's Fusion sedan win of the "Green Car of the Year" at the Los Angeles auto show.

The Fusion hybrid is estimated to get 47 miles per gallon, although early tests by Consumer Reports magazine signal that the Fusion hybrid, like other hybrids that have been tested, has not come near that figure.

Ford spokesman Wes Sherwood said the company was expecting to see a wider range for fuel economy on its new generation of hybrids because it is not asking drivers to compromise on vehicle performance.

"If you want to drive for maximum fuel economy, the car has the tools. You can do it," Sherwood said. "If you want to drive 80 miles per hour on the highway you aren't going to get 47 miles per gallon."

A hybrid is an automobile with more than one power source, such as an electric motor and an internal combustion engine, or an electric motor with a battery and fuel cells for energy storage.

Hyundai mea culpa

In one of the first public appearances by a Hyundai executive to address the mileage issue, John Krafcik, head of Hyundai Motor America, took the auto show stage on Wednesday emphasising how much the carmaker had done to make amends.

"We've sent letters to the owners of every affected vehicle," Krafcik said. "We've spoken to thousands by phone, email, and in person at our dealerships."

Fisher from Consumer Reports said that, in the end, consumers won't bolt from Hyundai. Whether the highway mileage figure is 38 miles per gallon or 40 miles per gallon makes little difference to most consumers, he said.

However, he added, some people have taken notice, and he said it would be wise for all automakers to make sure their claims ring true.

"The actual fuel economy, it's really not that big of a deal," said Fisher. "The question is - do you trust this automaker? Are they building safe cars? Are they going to cheat somewhere else where it comes to safety or something else?"

This article was originally published by Reuters. Republished with permission.