Hyundai Horsepower Deal Irks Dealers

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Debit-card settlement won’t fully reimburse dealerships

By Mark Rechtin
Automotive News / May 24, 2004

These Hyundai vehicles had their horsepower overstated by more than 2.5%.VEHICLEMODEL YEARENGINEAccent1996, 1997, 1999I4Elantra1997-2002I4Sonata2001-2002I41999-2002V-6Santa Fe2001-2002I42001-2002V-6Tiburon1997-2001, 2003I42003V-6XG 3002001V-6Source: Hyundai

LOS ANGELES – Hyundai Motor America is compensating customers who bought cars with overstated horsepower ratings, but the automaker is asking some dealers to pay part of the cost.

Under a proposed legal settlement, the automaker will give debit cards to 850,000 buyers of Hyundai vehicles. A customer can choose either a same-as-cash debit card worth from $50 to $225 or a debit card worth up to $325 of parts and service work at Hyundai dealerships.

But dealers will be reimbursed only 60 cents on the dollar by Hyundai for debit-card purchases, meaning they could lose money on debit-card sales.

Ed Bradley, Hyundai vice president of national sales, said dealer participation is voluntary, and that no one is forcing them to accept the debit cards.

"It’s a challenging situation but an equitable solution," Bradley said. The plan was approved by a majority of the dealer council, he said.

One dealer, who requested anonymity, disagrees. Dealers that do not accept Hyundai’s reimbursement terms cannot accept the debit cards. That means a customer will leave that dealership with a sour taste and likely take all of his business to the dealer who accepts the debit card, the dealer said.

Bradley said some transactions might cause the dealer to lose money. But "any time we can drive a customer back into a Hyundai dealership, that’s a positive," he said. "It’s no different from a dealer offering price leaders to get customers to buy other goods and services."

Dealer council representative Morrie Furman, owner of Arnold Hyundai in Roseville, Mich., said the reimbursement issue "is not that big a deal.

"If I get any customer willing to come in with a $50 debit card, and I can sell him something, that’s great," Furman said. "If we were talking about thousands of dollars on a card, then I would be concerned. Besides, I think most customers will take the cash, anyway."

Hyundai overstated the ratings on about 1.3 million vehicles in 1992 to 2002 models. Ratings on some six-cylinder models are off by as much as 20 hp.

Only customers with horsepower overstated by more than 2.5 percent are included in the settlement. More than 400,000 units had horsepower numbers overstated by greater than 4 percent.

The subsequent suits claimed Hyundai deliberately overstated the cars’ power as a marketing ploy to sway buyers from competitors.

A tentative sign-off by a Superior Court judge in Santa Ana, Calif., is set for June 16. The settlement cost to Hyundai has been estimated at $85 million.

Some Kia Motors America Inc. models with Hyundai engines also had overstated horsepower ratings. Kia spokesman Kim Custer said those vehicles are involved in a separate legal case.