Attorney General Eric Holder said at a news conference Monday that car manufacturers Kia and Hyundai had misrepresented their products' fuel economy ratings and would face penalties of $100 million. (AP)

Attorney General Eric Holder said at a news conference Monday that car manufacturers Kia and Hyundai had misrepresented their products' fuel economy ratings and would face penalties of $100 million. (AP)

The Obama administration Monday announced a settlement of more than $300 million with South Korean automakers Kia and Hyundai for understating greenhouse-gas emissions from nearly 1.2 million of their cars and trucks.

The record fine of $100 million and other penalties were described as the largest enforcement action of its kind under the federal Clean Air Act, in an unusual case involving emissions credits earned by manufacturers for producing low-emission vehicles, Environmental Protection Agency and Justice Department officials said in announcing the agreement.

Under the terms of a voluntary consent decree, Hyundai and Kia also will forfeit 4.75 million greenhouse-gas credits, estimated to be worth more than $200 million. Car companies earn the credits for manufacturing vehicles that emit less greenhouse-gas pollution than the law requires.

“Businesses that play by the rules shouldn’t have to compete with those breaking the law,” said EPA Administrator Gina McCarthy, who announced the settlement at a joint news conference with Attorney General Eric H. Holder Jr. “This settlement upholds the integrity of the nation’s fuel economy and greenhouse-gas programs and supports all Americans who want to save fuel costs and reduce their environmental impact.”

The consent decree stems from a complaint filed by federal regulators and California state officials that accuses the two companies of misstating the emissions performance of more than a million cars and SUVs from the 2012 and 2013 model years. The inaccurate figures allowed the companies to earn greater profits while also misleading consumers about the environmental impact of their cars, administration officials said.

The Justice Department and EPA stated that the automakers violated the Clean Air Act by overstating fuel efficiency in their vehicles. (Mary Altaffer/AP)

The problem, discovered during routine auditing by EPA officials, involved four Hyundai models — the Accent, Elantra, Veloster and Santa Fe — as well as Rio and Soul vehicles made by Kia.

Both companies agreed to reform their emissions-testing procedures after EPA investigators discovered that the companies were basing their pollution figures on the most favorable test results instead of averages from large numbers of tests.

Hyundai officials did not acknowledge wrongdoing in the consent decree. In a statement, the company said it had cooperated fully with EPA officials after the problem was discovered, adding that Hyundai was following auditing procedures approved by federal regulators.

“Hyundai has acted transparently, reimbursed affected customers and fully cooperated with the EPA throughout the course of its investigation,” said David Zuchowski, president and chief executive of Hyundai Motor America. “We are pleased to put this behind us, and gratified that even with our adjusted fuel-economy ratings, Hyundai continues to lead the automotive industry in fuel efficiency and environmental performance.”

Chris Hosford, a Hyundai spokesman, said in an e-mailed statement that “Hyundai’s view is that this was an honest mistake and there was a lack of clarity/broad latitude in EPA rules and guidance that resulted in the issues outlined by the government.”

Hosford said the temperature range for running tests was one issue that affected the fuel-efficiency numbers.

“EPA has acknowledged that its rules and guidance need to be updated,” he added.

Hyundai has also been the target of a lawsuit by South Korean consumers who say the company exaggerated fuel-efficiency numbers of its Santa Fe model. The company in August apologized and offered customers compensation for extra fuel costs. In 2012, the EPA said Hyundai and Kia issued incorrect fuel-efficiency figures for more than a third of the vehicles they had sold over the previous two years. At that time, Hyundai blamed “procedural errors.”

Jeffrey R. Holmstead, a partner at the law firm Bracewell & Giuliani and who headed the EPA’s air and radiation office under President George W. Bush, called the settlement “huge” given the fact that carbon dioxide doesn’t have the same immediate public heath impact as other air pollutants.

“It shows they’re serious about taking on greenhouse-gas emissions,” Holmstead said of administration officials.

Other carmakers are on alert. In June, Ford Motor cut the estimates on the gas mileage stickers on six models for the years 2013 and 2014, including its hybrid, plug-in hybrid and Fiesta models. The company mailed “goodwill” checks to customers to compensate for the estimated average fuel cost difference between the old and new fuel-efficiency estimates.

“A key purpose of this settlement is to send a message to other companies to stop misrepresenting how much pollution their vehicles emit,” said Daniel Becker, director of the nonprofit Safe Climate Campaign and an expert on fuel-efficiency regulations. Noting Hyundai’s and Kia’s loss of greenhouse-gas credits, Becker said, “there are real world consequences for polluters when they lie about their pollution.”

Juliet Eilperin contributed to this report.