Hyundai/Kia: False MPG Claims (2014)

Controversy

Hyundai Company logo

Hyundai operates the world's largest integrated automobile manufacturing facility in Ulsan, which is capable of producing 1.6 million units annually and employs about 75,000 people around the world. Hyundai vehicles are sold in 193 countries through some 6,000 dealerships and showrooms worldwide. In 2010, Hyundai sold over 1.7 million vehicles worldwide. Popular models of that year include the Sonata midsize sedan and Elantra compact.
Hyundai may be a Korean company, but over half the cars they sell in the U.S. are made in the U.S. They have a technologically sophisticated manufacturing facility in Montgomery, Alabama, engineering facilities in Michigan, plus design, research, and testing grounds in California. All of which provide around 5,000 jobs for American automotive workers.
Kia Motors Corporation (KMC) is also a Korean company. It was founded in 1944, headquartered in Seoul, and is South Korea's oldest manufacturer of motor vehicles and also the second-largest automobile manufacturer, following the Hyundai Motor Company, with sales of over 2.7 million vehicles in 2012. Kia today has over 42,000 employees worldwide and annual revenues of over US$14.6 billion.
Kia is now a subsidiary of the Hyundai-Kia Automotive Group, which means the company is 32.8% owned by the Hyundai Motor Company. These two companies are the same, but they use a different brand name to sell more products on different styles of cars.
Under their Mission Statement, officially referred to as the vision statement, the Hyundai-Kia Automotive Group has defined its mission through the year 2020 as : “To become a trusted lifetime partner of our customer, we will bring a new perspective to automobiles through innovation mobility solutions based on human-centric, eco friendly technologies and service.” They also presented three managerial commitments that provide the frameworks for Hyundai-Kia management philosophy. They are Unlimited Sense of Responsibility, Realization of Possibilities, and respect for Mankind. All of this showed that Hyundai-Kia Automotive Group has a good sense of their company's image, and this can lead to increased sales.

Kia Motors logo

The way Hyundai-Kia describe themselves on their mission statement and management philosophy can be proven wrong by one famous scandal of Hyundai-Kia that occurred in the year 2012. In the scandal, “Hyundai, Kia Allocated $412M For False MPG Claims” According to Luke Vandezende “Korean car manufacturer Hyundai-Kia is spending big money to keep customers happy after the EPA discovered overstated fuel economy claims on several of its cars". This showed that the way Hyundai-Kia acts is opposite to what their mission statement says. They claimed to be a human centric based company thinking about customers. However, they are thinking about money and making maximum profit instead. They also claimed to have eco-friendly technologies and services, try to save the environment but they were lying because of their overstated mpg claims to the EPA. Even though Hyundai-Kia lied to their customers about their overstated gas mileage, A good qualify about the company is that they also responded to what they did. Vandezande said that “They promised to continue funding customers with prepaid gas cards to account for the difference in claimed and actual mileage as long as the owners keep their car.” This showed that Hyundai-Kia Automotive Group has a good sense of responsibility for what they did, but their business will have a negative impact on their customers’ trust even though they already solved the problem.
So now you can see that the company was lying. When you read on their mission statement about trust, how can you believe this company after you realize that what they said was all wrong and they knew about it.
In all four major ethical theories, including Individualism (Friedman's Economic Theory), Utilitarianism, Kantianism, and Virtue Theory, the scandal of Hyundai-Kia Automotive Group having false advertising and lying to their customers can be considered highly unethical based on the evidence that is given.

Individualism
According to Individualism Theory (The Economic Theory) Friedman said "The only goal of business is profit, so the only obligation that the business person has is to maximize profit for the owner or the stockholders." From what he said, I think Hyundai-Kia Automotive Group is exactly what Friedman was talking about because their goal is to maximum profit for themselves and their stockholders even if it offends their customers. The company is trying to create a good image and build their customers' trust. If they can gain more customers from what they created then they will maximize their profit by what they are marketing. From the scandal, it seems like Hyundai-Kia Automotive Group does not really care about what they overstate on gas mpg, their goal is to maximize profit. But even though they make a lot profit from this false ad, they still need to pay back their customers who are victims of their false advertising. Moody’s Investor Services previously predicted the company would lose $100 million annually to paying out gas reimbursements, which will have to come from any profits.

Utilitarianism

Chung Mong-Koo, CEO of Hyundai-Kia

According to Utilitarianism, all actions should aim at something that is good. Happiness or pleasure are the only things of intrinsic value. The Hyundai-Kia Automotive Group’s CEO and their stockholders, who are the company stakeholders, did obtain happiness through their marketing because they gained a lot of profit. On the other hand, the customers who trusted in their false advertisement would not be happy because they believed in what they supposed to get when they payed a large amount of money for their car, but the result was not the hoped outcome. The lie from this company lose their customers' trust. This untruthful company might not gain any sales benefit in the future.

Kantianism
Kantianism is based on acting rationally, do not act inconsistently in your own actions or consider yourself exempt from rules, allow and help people to make rational decisions, respect people, their autonomy, and individual needs and differences, be motivated by good will, seeking to do what is right because it is right. Hyundai-Kia Automotive Group 's actions toward their own customers does not conform to Kant's principles because they lied about gas mileage to their customers. Also the way Hyundai-Kia Automotive Group acted is not rational because it is inconsistent with decision that attract the most customers. This action is opposite of what Kant said on his Formala of Humanity that "Act in such a way that you treat humanity, whether in your own person or in the person of another, always at the same time as an end and never simply as a means." This showed that Hyundai-Kia Automotive Group 's false ad lying about gas mileage does not respect their customers' humanity. The way they treated customers is not the way that they wanted those customers to treat them back because the company still wants to make a profit from them.

Virtue Theory 
 In Virtue Theory, the characteristics that allow things to function properly are called good making features or virtues. If the business acts in a way that fits virtue characteristics, it means that it is acting ethically. The four virtue characteristics are courage, honesty, temperance/self control, and justice/fairness. Courage represents risk-taking and willingness to take a stand for the right ideas and actions. Honesty represents agreements, hiring and treatment of employees, customers and other companies, Temperance/self control represents “reasonable expectations and desires”, and Justice/fairness represents hard work, quality products, good ideas, fair practices. Hyundai-Kia Automotive Group has none of these virtues. They did not even have the courage to have the right idea and action to gain their profit. They did not have honesty toward the loyal customers that they were advertising to that the car can drive on what the company claimed the mpg was, which is not true. They have no self control due to their expectations and desires to make the maximum profit with their lies. They also have no fairness due to the way they mislead and treat to their customers, who lose while they profit.

Conclusion
The Hyundai-Kia Automotive Group scandal showed that the false advertising on their car mileage is unethical. The four different ethical theories represent how to be an ethical company. A person could see from this that Hyundai-Kia Automotive Group is an unethical company based on the way they lied to their customers and the way they violated standard ethical practice and theories.


References

"Philosophy." Kia. Kia Motors Corp, n.d. Web. 1 Apr. 2014. <http://www.kia.com/worldwide/about-kia/company/philosophy.aspx>.

"Corporate Philosophy Framework." Hyundai. Hyundai Motor Company, n.d. Web. 1 Apr. 2014. <http://worldwide.hyundai.com/WW/Corporate/CorporateInformation/CorporatePhilosophy/index.html>.

Vandezando, Luke. "Hyundai, Kia Allocate $412M For False MPG Claims." Autoguide. VerticalScope Inc, 25 Feb. 2013. Web. 1 Apr. 2014. <http://www.autoguide.com/auto-news/2013/01/hyundai-kia-allocate-412m-for-misstated-fuel-mileage.html>.

Salazar, Heather, Dr. "Business Ethical Theories." Herman Hall. Western New England University, Springfield, Massachusetts. 11 Feb. 2014. Lecture.