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Engineer Employee Receives $24 Million in Hyundai Defective Engine Whistleblower Lawsuit

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A former safety engineer for automaker Hyundai has been awarded $24.3 million for his share of a National Highway Transportation Safety Administration whistleblower complaint. It is the biggest whistleblower award in the auto industry.

In 2016, Kim Gwang-ho was a safety engineer at Hyundai, where he had been employed for 26 years. He filed a report with National Highway Transportation Safety Administration (NHTSA) claiming that Hyundai and its subsidiary, Kia had failed to address a safety defect in the engines of certain vehicles manufactured by the companies.

Hyundai and KIA Engine Flaws

Hyundai and Kia vehicles included in the whistleblower complaint filed with NHTSA, were using Theta II engines which were prone to seizing, possibly leading to permanent engine failure or even, an engine fire. The issue was apparently caused by manufacturing debris which could restrict the oil flow to bearings, resulting in early failure of the four-cylinder Theta II engines. The repair was costly, requiring engine block replacement.

Initially, In September 2015, Hyundai recalled only certain vehicles made before 2012, stating the issues had been resolved. They failed to recall Kia automobiles manufactured with the same engine, or other year models of Hyundai which had been affected. In 2016, additional vehicles were recalled but many customers had already been placed at risk.

Though 1.6 million Hyundai and Kia vehicles with Theta II engines were eventually recalled, NHTSA ruled that Hyundai and Kia had failed to respond to complaints and had delayed recalling the vehicles, posing a safety risk to the public. NHTSA had taken over the lawsuit against Hyundai after the issue was reported to the agency by Mr. Kim.

NHTSA Resolves Lawsuit

In November 2021, NHTSA determined that KIA and Hyundai had failed to issue a timely recall. The agency and automakers agreed to resolve the three-year probe with payment of $81 million in cash penalties and Investment millions of dollars in safety improvements.

As part of the Motor Vehicle Safety Whistleblower Act, passed by Congress in 2015, whistleblowers receive a portion of certain lawsuit fines or settlement with the U.S. government. NHTSA is still under the process of drafting regulations for administration of the act, but whistleblowers may receive up to 30% of the settlements in which the penalties are over $1 million.

The Motor Vehicle Safety Whistleblower Act is similar to other whistleblower protections in other government agencies such as the Securities and Exchange Commission (SEC), the Federal Trade Commission (FTC) and various health agencies including Centers for Medicare & Medicaid Services (CMS) which have awarded millions of dollars in whistleblower awards.

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