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Hyundai to Pay $17.4 Million Fine for Car-Recall Delay

Aug. 7 (Bloomberg) -- Hyundai Motor Co., South Korea’s largest automaker, agreed to pay a $17.4 million U.S. fine for failing to promptly report defects in brakes on Genesis models.

Hyundai had instructed dealers in 2012 to replace brake fluids without explaining that the reason for the service was because of potential corrosion that may harm braking, the National Highway Traffic Safety Administration said in a statement today. It wasn’t until after NHTSA began an investigation that Hyundai in 2013 issued a formal recall.

The NHTSA fine is one of the biggest in history for such a violation and comes three months after General Motors Co. had to pay a record $35 million penalty for how it handled the recall of 2.59 million small cars. Regulators have since been pushing lawmakers to raise the maximum allowable fine to as much as $300 million to deter companies from hiding safety defects.

“This administration will act aggressively and hold automakers accountable when they put the American public at risk,” Transportation Secretary Anthony Foxx said in the release.

Six consumers reported collisions related to the Hyundai issue, including two who were injured, NHTSA said in the release. There have been no fatalities. The defect involved 43,500 Genesis sedans from the 2009 to 2012 model years.

Most of the vehicles were repaired in a 2013 recall Hyundai did after NHTSA opened its investigation, the company said in an statement. The company is dedicated to promptly reporting safety issues, David Zuchowski, president and chief executive officer of Hyundai Motor America, said in the release.

GM Brakes

“In order to mitigate a situation like this in the future, Hyundai is instituting new organizational and process improvements, and enhancing the ability of the U.S. leadership team to readily respond to regulatory reporting requirements,” Zuchowski said.

The same brake systems were also installed on GM cars, NHTSA said. After being informed of the potential for corrosion on the brakes, GM in 2012 initiated a recall to replace brake fluid in 67 countries, according to NHTSA’s consent order with Hyundai. In the U.S., GM also ordered its dealers to inspect the brakes and replace parts on the brakes if necessary.

While Hyundai notified its dealers, it didn’t tell vehicle owners about the safety issue, according to NHTSA.

The highway safety agency discovered the issue after opening an investigation into consumer complaints about the effectiveness of braking on Genesis vehicles.

The brake-line corrosion could lead to a “soft/low brake pedal” that reduced the effectiveness of the brakes, according to NHTSA.

To contact the reporter on this story: Alan Levin in Washington at alevin24@bloomberg.net

To contact the editors responsible for this story: Romaine Bostick at rbostick@bloomberg.net Stephen West

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