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VW’s DSG recall, CCTV 3.15 and China’s new leadership

After years of denying, dodging, public relations maneuvering, VW China announced on March 16 that it would recall its vehicles made at FAW-VW and Shanghai-VW equipped with DSG automatic transmissions.

The announcement came right after China’s quality watchdog, the General Administration of Quality Supervision, Inspection and Quarantine (AQSIQ) issued a statement on the same day that it had identified that “the DSG transmission is defective and may cause loss of power creating potential safety problem.” In its notice to VW China, the AQSIQ said: “If VW fails to honor its legal responsibilities, the AQSIQ would issue a restraining order for compliance.”

It was obvious VW decision came under pressure from the government. Without AQSIQ’s notice, the German carmaker was still trying to ignore public opinion even after CCTV aired the DSG problems experienced by hundreds of consumers at its annual March 15 consumer advocacy program.

Volkswagen failed to act even after the AQSIQ summoned its representatives to a meeting earlier on February 27 demanding a vehicle recall.

The case of VW’s refusal to recall its problematic vehicles and the practice of a double standard in China shows how a leading multinational carmaker has become growingly arrogant and snobbish in its most important overseas market.

In teaming up with China’s two largest automobile groups, FAW and SAIC, Volkswagen has succeeded in taking up the lion’s share of China’s growing auto market. And as FAW and SAIC are powerful state-owned companies, Volkswagen has been able to cultivate the best of relationship with local and central governments successfully lobbying for its interests. In addition, it has also created a bureaucratic corporate communications team in Beijing and working through a myriad of public relations firms to build a close relationship with the local media in an effort to prevent from negative press.

Powerful government ties and public relations efforts, including “red envelopes” and advertising dollars, cannot cover up product safety problems. When a carmaker forgets about its responsibilities to ordinary consumers, it would lose consumer trust and corporate credibility.

Volkswagen seems to be not the only multinational carmaker that practices a double standard in China in terms of vehicle safety, equipment, warranty and recall. In another program on March 18, CCTV claimed that cars made by BMW, Mercedes-Benz and Audi allegedly use hazardous materials that may be harmful to drivers.

There are other instances of double standard of multinational automakers in China. According to a seasoned automotive analyst, a leading global automaker has allegedly introduced the worst of its engines in terms of fuel efficiency into China for local assembly. But under its powerful corporate communications efforts, almost all of the Chinese media have been PR’ed and nobody writes about it. Consumers are unfortunately kept in the dark.

CCTV as a state-owned and government controlled TV station has been questioned, rightly so, for its fairness and impartiality in the selection of expose stories during the annual consumer advocacy day. But nobody denies that it is still the most powerful electronic medium in China. Despite allegations that it has also been PR’ed through advertising dollars, CCTV is in no position to ignore serious consumer complaints especially when central authorities become aware of such complaints. 

It may be coincidental that CCTV’s expose stories were aired right after China’s new leaders formally came on the stage during the annual session of the National People’s Congress. But from all indicators so far, the new leaders are keen in addressing issues concerning the livelihood of the general public and government corruption.

A noted auto analysts once said that in China “multinational carmakers have kidnapped state-owned automakers and in turn state-owned automakers have kidnapped the government.” Hopefully with the arrival of new leaders, we may begin to see the emergence of a government free of multinational kidnap.

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