Orange County Register: Hyundai Santa Fe Engine Problems Not Reported To Public

January 9 2003, A story in The Orange County Register reported that Hyundai's new Santa Fe SUVs have been plagued by hundreds of engine failures that the company has not disclosed to customers or regulators, interviews and documents obtained by The Orange County Register show.

Nearly 300 engines built in Korea and installed in 2001 Santa Fe models shipped to the United States have seized and failed, sparking a multi-million-dollar effort by the Fountain Valley, CA-based distributor to quickly repair the cars and make other concessions to keep customers happy.

Detailed lists of the V6 engine failures show that cylinder liners cracked or slipped inside the block on Santa Fe SUVs with as few as 18 miles while a prospective customer was on a test drive in one case. When that happens, the engine is essentially destroyed.

Other engines went 1,000 to 12,000 miles before failing -- frequently while owners were driving at freeway speeds, the documents show.

"The engine failed at 1,600 miles. It just bucked a little bit and then stopped," said Lorraine Chatterton of Petaluma, CA. "We had to coast from the center lane over to the shoulder on Interstate 80. We were lucky there wasn't much traffic."

"We had 3,000 miles on the car, and the engine stopped," said Alyce Breshears, 66, of Sanger, CA.

It's not known if the engine failures resulted in any crashes or injuries. The company said no one was injured when the engines failed.

The failures could be particularly embarrassing for the Korean company, which has tried to shed its former image of poor workmanship and reliability, auto marketing experts said. The Santa Fe, in particular, has been hailed as a quality product and helped Hyundai to outsell Japanese rivals Mitsubishi and Mazda last year.

Federal law requires manufacturers to report, within five days of discovery, any defect that could be a safety hazard. Hyundai officials have known about the problems since November of 2000, the newspaper stated, but the company has never reported the problem to the National Highway Traffic Safety Administration.

The full extent of the problem is unclear.

"They are obligated to tell us as soon as they realize they've got a problem," said Liz Neblett, a spokeswoman for NHTSA. "It's very possible that the Office of Defect Investigation would consider this a safety hazard. We'd love to hear about what happened from Hyundai owners."

Chuck Halper, vice president of service for Hyundai Motor America, confirmed that there have been 290 engine failures since November 2000, plus as many as six failures of replacement engines. Halper said Hyundai did not report the problems to NHTSA because the company doesn't believe it is a safety issue.

"We looked at it very carefully to make sure it was not a safety or emissions-related issue," he explained. "That was in association with our parent company (Hyundai Motor Company) and our engineering and legal community."

However, automotive experts contacted by The Register didn't agree.

"They should announce it because somebody out there could have a failure going down the freeway. Losing power at speed in the middle of traffic is dangerous," said Gordon Wangers, managing director of Automotive Marketing Consultants Inc., of Vista, CA. "You could warn consumers to be wary, to put it in neutral and coast over if a failure does occur. They should have some communication with customers."

Hyundai data documenting the failures show that the engines involved were installed in cars manufactured in Korea between July and November of 2000.

Halper said the company discovered the cylinder liner problem in November 2000 and switched to a thicker liner. He said none of the new engines have failed, adding that replacement engines failed because technicians did not clean all the metal debris out of engine manifolds and plumbing before installing new engines.

He characterized the failures as a very small percentage of the 66,000 Santa Fe's sold by Hyundai, and said the company has no plans to notify either NHTSA or Santa Fe owners.

"Keep in mind that the defect rate is very low," Halper said. "I wouldn't know what to tell owners. I might also tell them there is a problem that your CD player might jam."

Hyundai officials said they did not know how many Santa Fe's with the problem engines were sent to the United States but that the company sold about 7,000 V6 Santa Fe SUVs in the United States in 2000. The officials acknowledged that some of the early models also were likely to have been sold in 2001.

In addition to paying for one, and sometimes two new, engines at $4,500 apiece, documents show the company has made owners' monthly payments, given them tow hitches or stereos, upgraded them to Hyundai's XG300 luxury car, or bought them outright for cash.

"This is an important investment these customers have made; they put the confidence in our brand," Halper said. "We thought this was an opportunity to show we stand behind our product."

Wangers and other auto consultants praised Hyundai for doing the right thing for customers who have experienced the engine failures.

"Hyundai has made huge quality strides in recent years. I wouldn't say this is reason to say the sky is falling on Hyundai vehicles. All manufacturers have these problems," Wangers said.

But, he added: "This is a pretty big problem. It's particularly sensitive in Hyundai's case because there are still a lot of people who remember their previous reputation for bad quality. From a public relations standpoint, it could be unfavorable for this to get out."

After coming to this country 16 years ago, Hyundai was damaged by reliability problems with the Excel compact. In 1987, the company sold 263,610 cars in the United States. By 1998, sales were down to 90,000, and the company was laying off U.S. employees.

Hyundai's U.S. executive, Finbarr O'Neill, called it "a disaster."

Starting in 1999, Hyundai countered perceptions of poor quality head-on by offering a 10-year, 100,000-mile warranty and ads carrying the message: "A decade of dependability."

The company's sales have exploded.

Last year, Hyundai sold 346,235 vehicles in the United States -- a 42 percent increase over 2000, putting it seventh in U.S. sales, ahead of Mitsubishi, Mazda and Mercedes-Benz.

More than 56,000 of those vehicles were Santa Fe SUVs, a new category for Hyundai. The Santa Fe is a mini SUV, based on a car chassis that competes with the new Ford Escape and Mazda Tribute, the Toyota RAV 4, and the Honda CRX.

The Santa Fe has been well received by customers, and recently won first in owner satisfaction when pitted against the Toyota, the Honda and seven other compact sport utilities by AutoPacific, a Santa Ana, CA-based group of auto marketing consultants.

Nonetheless, Hyundai's quality problems aren't all behind it.

Last year, Hyundai had to recall more than 150,000 Accents, Elantras, Sonatas, Tiburons and XG300 sedans for faults ranging from defective air bags to throttle controls and ignition faults that could stall the car at speed. That's nearly half the cars sent to this country.

Every year, manufacturers announce hundreds of recalls affecting millions of vehicles.