Hyundai and Kia Earmark A Further $2 Billion To Fix Known Engine Issues
The Theta engine debacle is costing big money to fix.
Hyundai and Kia have set aside 2.9 trillion won ($2 billion USD) in Q3 to cover off issues relating to defective Theta GDI engines.
As reported by Bloomberg, Hyundai has earmarked $900 million USD for the matter, a full 44% of the automaker's estimated third quarter profits. Kia's share is a further $1.1 billion, marking 66% of its estimated profits this quarter.
Collectively, Hyundai and Kia have been dealing with issues with the Theta GDI engines for years now, in particular the 2.0-liter and 2.4-liter Theta II models. The problems largely center around manufacturing defects in the crankshafts. Metallic shavings and burrs from the crankshaft milling process were left behind and would enter the oil channels of the engine.
Over time, this material can block off oil flow to parts of the engine, causing accelerated wear and eventual bearing failure. Roughly 2.4 million Hyundais and 1.8 million Kias are potentially affected by these issues, creating a huge problem for the companies to deal with.
A class action suit was eventually brought against the companies, covering a range of Hyundai and Kia models built from 2011 to 2019. As a result, many of these cars are now eligible for a free engine replacement in the event of problems.
The problem is that more owners are claiming the engine replacements than Hyundai or Kia initially expected. New engines don't come cheap, of course, let alone the labor required to replace them. Add in the economic pressures of the current supply chain issues and the weak Korean currency, and it's all added up to significantly higher warranty costs for the companies involved.
Both companies have been paying through the nose regarding this issue for years now. In addition to warranty costs, the company has also faced millions in fines for failing to recall cars that had problems.
Given the sheer number of cars involved, it's no surprise Kia and Hyundai are setting aside huge sums to cover the cost of repairs. The good thing for consumers is that the problem is indeed being dealt with.
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