Press Release Volkswagen Recalls for Gearbox Problem in China

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Germany’s Volkswagen AG (VLKAY) decided to recall 384,000 vehicles in China, following media reports that indicated quality problems with the vehicles, especially their gearboxes. The recall would include Sirocco, Golf Wagon, Jetta, Magotan, Touran and Passat models that were imported or manufactured in China between December 2008 and March this year.

Volkswagen revealed that there could be a problem with direct-shift gearboxes, which may lead to power interruption. However, the company stated that the driver could remain in control of the vehicle despite the problem. Volkswagen will repair the gearboxes and install the latest software upgrades in the vehicles free of cost.

China is the biggest market for Volkswagen and the automaker occupies the lion’s share of that market among all other automakers. Volkswagen sold 2.81 million vehicles in the country in 2012, occupying 14% of the market. Sales in year went up 24.5% from 2011.

Volkswagen is the latest automaker that joined the gang of automakers making frequent safety recall of vehicles. Among them, Toyota Motor Corp. (TM) is the largest, recalling more than 20 million vehicles globally since Nov 2009.

The string of recalls has led Toyota to face numerous personal injury and wrongful death lawsuits in federal courts. Last year, the Transportation Department of U.S. slapped a fine of $17.35 million on Toyota due to late response regarding a defect in its vehicles to safety regulators as well as late recall of those vehicles.

According to the department, it was the maximum allowable fine under the law for not initiating a recall in a timely manner. The latest fine adds to $48.4 million imposed by the U.S. government on the company in 2010 due to late recall of millions of defective vehicles.

Other automakers that recalled vehicles recently include Ford Motor Co. (F) and a Japanese automaker Honda Motor Co. (HMC). This month, Ford Motor announced recall of 7,150 vehicles due to a problem with the child lock on the left rear door. About 5,650 vehicles will be recalled in the U.S. The recall involves redesigned 2013 Escape crossover, which has been recalled multiple times last year.

Honda Motor also announced global recall of 250,000 vehicles due to a problem with the braking system in certain models. The problem lies with the Vehicle Stability Assist control unit in the vehicles that can cause the car to brake when the driver does not press the brake pedal.

Volkswagen AG, a Zacks Rank #4 (Sell) stock, posted an impressive 41% rise in net profits to €21.7 billion ($28.7 billion) in 2012 from €15.4 billion in the prior year, driven mainly by the accounting boost received from the addition of Porsche into the company’s well renowned 12 brands.

Revenues escalated 21% to €192.7 billion ($254.9 billion), driven by impressive vehicle deliveries in the year that topped 9 million units globally for the first time in the company’s history. Vehicle deliveries grew 12.2% to 9.3 million units in 2012, driven by strong demand in North America and Asia, partially offset by weak sales in Europe.

Source: http://finance.yahoo.com/news/volkswagen-recalls-gearbox-problem-china-175831995.html

BLOOMBERG

Volkswagen to Recall Cars in China Over Gearbox Defects, plans to recall vehicles in China after drawing scrutiny from the nation’s quality inspector and state broadcaster over defective gearbox systems.
The company will conduct a voluntary recall related to its direct-shift gearbox system, Volkswagen said in March 16 statement, without providing details. The statement came after China’s General Administration of Quality Supervision, Inspection and Quarantine said it told the German automaker to conduct a recall, and after Volkswagen was featured in China Central Television’s annual show about anti-consumer practices - - a program that also featured Apple Inc. (AAPL) and Anhui Jianghuai Automobile Co. this year.

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China Orders Recall of Volkswagen Vehicles After State TV Probe

Michele Tantussi/Bloomberg
A man holds a Volkswagen AG (VW) flag, left, alongside the Chinese national flag during the German-Chinese signing ceremony at Volkswagen AG's headquarters in Wolfsburg, Germany on April 24, 2012.
A man holds a Volkswagen AG (VW) flag, left, alongside the Chinese national flag during the German-Chinese signing ceremony at Volkswagen AG's headquarters in Wolfsburg, Germany on April 24, 2012. Photographer: Michele Tantussi/Bloomberg

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China Orders Recall of Volkswagen Vehicles After State TV Probe

Dado Galdieri/Bloomberg
In its March 16 statement, the quality watchdog didn’t say how many Volkswagen vehicles would be involved in the recall and calls to its news department seeking comment went unanswered over the weekend.
In its March 16 statement, the quality watchdog didn’t say how many Volkswagen vehicles would be involved in the recall and calls to its news department seeking comment went unanswered over the weekend. Photographer: Dado Galdieri/Bloomberg
The Volkswagen case may test China’s recall laws introduced this year, which give the watchdog broader powers to order investigations and impose fines should manufacturers and importers fail to recall faulty products in a timely manner. The nation’s legislature approved plans last week to expand the authority of the food and drug regulator amid growing public discontent over quality and safety.
“Any manufacturer, under the new law, should be aware that there’s an increase in the chances that they’ll be ordered to recall,” said Paolo Beconcini, managing partner at Carroll, Burdick & McDonough LLP in Beijing, whose firm advises European and U.S. automakers on product liability and intellectual property issues in China.
Recall Estimate

As many as 680,000 units sold in China, including Bora, Golf, Passat and Lavida models, might be equipped with the DSG system involved, according to estimates by auto research LMC Automotive.
Volkswagen is currently “figuring out the different scenarios,” Christoph Ludewig, a spokesman for the company in Beijing, said in an e-mail today. “We are in touch with AQSIQ and will announce more when we have details.”
The company said in May last year that it had sold almost 1 million DSG-equipped vehicles in China.
Chinese owners of VW vehicles fitted with the technology -- a system with two gearboxes that help enhance gear changes and improve fuel economy -- have reported abnormal vibrations, loss of power and sudden acceleration, according to CCTV’s report.
The Wolfsburg, Germany-based automaker has addressed issues with the system in China since last year. In May, it said its Chinese division agreed to extend the warranty for the automatic transmission technology to 10 years in response to customer complaints. The standard warranty is two years.
Driver Feedback

Only a “few hundred” of DSG-fitted vehicles had faults that prompted driver feedback, according to a Bloomberg News interview with Harthmuth Hoffmann, a company spokesman, on May 31.
Companies operating in China, both domestic and foreign, are increasingly bracing for the annual CCTV show, broadcast every March 15 for World Consumer Rights Day, as the world’s second-biggest economy continues to expand.
Last year, France’s Carrefour SA (CA) shut an outlet in central China after being featured on CCTV. The year before, Henan Shuanghui Investment & Development Co. shares tumbled 10 percent after CCTV reported the company bought pigs that were fed an illegal additive.
The broadcast comes as China ushers in new state leadership for the first time in a decade, with Premier Li Keqiang yesterday pledging to improve consumer safety by tackling food problems and the environment with an “iron fist.”
Gearbox Problems

In its March 16 statement, the Chinese quality watchdog didn’t say how many Volkswagen vehicles would be involved in the recall and calls to its news department seeking comment went unanswered over the weekend. The regulator said it will compel the automaker to call back the vehicles if it doesn’t comply.
In its March 15 program, CCTV also investigated alleged flaws in the after-sales service of Cupertino, California-based Apple. Carolyn Wu, the company’s spokeswoman in Beijing, said the company has established a network of more than 500 authorized service centers in 270 cities across China to provide “unmatched” support to owners of its devices.
“Apple is dedicated to making the best products in the world and delivering unmatched customer service everywhere we do business,” Wu said in a phone interview today. “Our team is always striving to exceed our customers’ expectations, and we take any customer concerns very seriously.”