Volkswagen to Recall Almost 400,000 Vehicles in China on Gearbox Complaints
By Prasanth Aby Thomas | March 20, 2013 6:41 PM EST
China's quality watchdog has said in a statement that the German auto-maker and its local joint ventures will call back vehicles including Golf, Magotan, Sagitar and Audi A3 from 2 April onwards.
The firm and its partners "will replace the existing gearboxes with improved ones and upgrade the controlling software to the latest version for Volkswagen car owners to eliminate safety concerns. All such services are free," the statement read, according to Wall Street Journal.
The call-back comes after a special investigative programme on corporate malpractices from the country's state-owned China Central Television (CCTV), which said that Volkswagen's direct shift gearbox (DSG) transmission mechanism was triggering power problems.
China is considered Volkswagen's biggest market, where it sells more cars than any other foreign company. The recall is a major setback to the company, which is planning aggressive expansion moves in China.
The company had seen a 25 percent annual rise in China sales in 2012 and its two local joint ventures had posted a 42 percent jump in operating profits during the year.
Although Volkswagen has not yet revealed the actual costs that may be incurred due to the recall, Bloomberg reports, citing research firm LMC Automotive that the replacements could set the firm back by about 3,000 yuan ($483) to 10,000 yuan per vehicle.
"It's always reputationally damaging to have to deal with an issue that plays out in the public's eyes," said Bill Russo, president of auto consultancy Synergistics Ltd told Bloomberg.
"Will they take a hit? Of course. The issue is how can they recover from that and how quickly can they recover."
This is not the first time that CCTV has managed to trouble foreign businesses in the country. Its reports in December had prompted an inspection into the quality of Chicken used by Yum Brand's KFC, prompting a 6 percent drop in fourth-quarter sales in the country.
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