HYMLF - Hyundai Kia incur $2bn in quality costs

Hyundai executives ( OTCPK:HYMLF ) indicated that both the Hyundai and KIA brands will set provisions equivalent to about $2.04B related to recalls.

During a presentation on the subject of warranties and recalls on Tuesday, the Korean automaker said that its Hyundai and KIA brands will set aside provisions of 1.36 trillion KRW and 1.54 trillion KRW, respectively related to quality costs.

“We sincerely apologize for repeated quality issues and additional costs related to the Theta II GDI engine recall,” Seog-ju Cha, Head of Quality at Hyundai told analysts. “We will put our utmost efforts to secure engine quality considering market conditions and manage quality related cost in order to prevent repetition of quality issues.”

He added that the average maintenance cost of engine part replacements have declined notably in recent quarters. Specifically, costs are about 21% lower than levels seen in 2019.

“In the future, we will continue to reduce the cost by changing the logistic process and reducing the unit price of components,” Cha concluded.

Elsewhere, the automaker is reportedly considering closing its factory operations in Russia. Local media sources cited a lack of high tech equipment due to sanctions as the main impetus for the expected exit.

Read more on the auto manufacturer’s connected car aims .

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