John Krafcik at the NAIAS in 2012.
In a classic afternoon release designed to minimize coverage, Hyundai Motor America said last Friday that President and Chief Executive Officer John Krafcik leaves today, 31 December 2013. David Zuchowski, executive vice president of Sales, assumes his position on 1 January 2014.
No reason was given for Krafcik’s sudden departure, and a Hyundai spokesperson refused to comment on whether the personable executive was fired.
During Krafcik’s five years of service as CEO of the Korean brand, the former Ford Motor Company development engineer led Hyundai to period of explosive sales growth and market share increases, the result of new products aimed at high volume segments that undercut the pricing of competitors by thousands, and promoted by innovative warranty and financing programs. Hyundai will self more than 700,000 cars and light trucks when the books close on 2013, even though it is capacity constrained and desperately needs another U.S. assembly plant.
However, he also was the leader when Hyundai and sister brand Kia were caught in the largest mileage fraud in U.S. history. Just prior to Krafcik’s departure, Hyundai announced that it entered into an agreement with current and former owners and lessees of vehicles affected by the automaker’s November 2012 restatement of fuel economy ratings after being caught by the EPA for falsely inflating mileage claims. (Hyundai and Kia Caught in EPA Mileage Rating Fraud and Hyundai Cops Plea on Mileage Fraud Class Action)
The fraud produced mileage claims that could be as much as 6 mpg higher than EPA tests subsequently showed. About 900,000 vehicles are affected in the largest mileage fraud in history, including the best-selling Kia Optima and Hyundai Elantra sedans. Both makers heavily advertise and promote fuel economy as cornerstones of their brands.
In a statement Hyundai said that the settlement is valued at approximately $210 million, with that number dependent on how many customers elect to participate in the a one-time lump sum payment option or remain in the lifetime reimbursement program Hyundai introduced at the time of the mileage fraud announcement.
When the mileage fraud was uncovered in 2012, Hyundai provided a lifetime reimbursement program to compensate for additional fuel costs from the rating downgrade – plus a 15% premium in acknowledgment of the “inconvenience” to customers. Affected owners and lessees are paid based on their actual mileage and the fuel costs for the region in which they live.
To address allegations, including the requirement to return to a dealership for mileage verification, that plaintiffs felt deters participation in the reimbursement program, Hyundai agreed to now add a lump sum payment option. The proposed cash amount, which varies by vehicle model and ownership type, will result in an average estimated payment of $353 to Hyundai owners and lessees.
The owner of a 2012 Elantra, for example, would receive a lump sum payment of $320 minus any previous reimbursement payments. Affected Hyundai owners may elect the one-time lump sum cash payment or remain in the automaker’s lifetime reimbursement program. Consumers can also elect other options, such as a dealership credit of 150% of the lump sum cash payment amount, or a credit of 200% of the cash amount toward the purchase of a new Hyundai vehicle.
Following disclosure of the fuel economy fraud in November 2012, approximately 53 federal complaints were filed against Hyundai and Kia and later consolidated (Hyundai and Kia Fuel Economy Litigation, MDL No. 2424) in United States District Court for the Central District of California before Judge George H. Wu.
