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Volkswagen China faces crisis over DSG recall

Just as owners of Volkswagen cars equipped with direct shift gearbox (DSG) transmission were about to give up hope that Volkswagen would do anything about the faulty component, the German automaker was exposed at the annual “315 Gala” – an investigative special on corporate malpractice aired by China Central Television (CCTV) on March 15 – for exactly that problem.

Many had thought that Volkswagen would be exposed at the same show a year earlier, when the DSG problem surfaced and became the topic of conversation in the industry.

But a year has passed and Volkswagen’s sales in China have flourished without much impact from the DSG problem. Are consumers just ignorant or are there simply no problems at all?

The fact that a day later on March 16, the General Administration of Quality Supervision, Inspection and Quarantine (AQSIQ), China’s quality watchdog, issued a statement ordering Volkswagen to initiate a recall came as a surprise to many.

A spokesperson with the AQSIQ finally concluded that the DSG transmission is defective, can lead to power interruption and poses a risk to vehicle safety.

Just before March 15, 2012, media reports quoting a high-level executive from Volkswagen China about the DSG problem created a huge storm over the issue.

The issue then became the most debated subject in the industry for months. Most of it centered on whether the problem had the necessary and sufficient conditions for a recall. In other words, whether “a common condition within the same batch, model or type of automobile products due to design or manufacturing reasons existed at all that posed an unreasonable risk to personal and property safety or did not conform to relevant national automotive safety standards.”

During this time, the AQSIQ repeatedly discussed the issue with Volkswagen China without concluding whether there was an actual defect at all. Volkswagen China also repeatedly stated that the DSG problem existed but a recall was not necessary.  

A Volkswagen China executive had indicated that it proposed three different resolutions, including a recall that was deemed unnecessary by the AQSIQ. The executive added that problems such as abnormal sound and uneven gear shifting did exist with the DSG transmission but were not widespread and did not pose risks to vehicle safety. “The TSI (Turbo Fuel Stratified Injection) + DSG powertrain combination is safe and mature from a global perspective,” the media quoted this executive as saying.

However, the AQSIQ responded by saying that it was Volkswagen China itself that chose not to make a recall because it believed the DSG problem did not affect vehicle safety.

On March 2, 2012, Volkswagen China issued a statement saying that under certain conditions, especially when temperatures and humidity levels are high and vehicles have been parked for a long time, the mechatronic control unit valve of the DSG transmission of some of its vehicles could crystalize, which in turn prevents gears from shifting properly after the vehicle is started. The problem can be prevented through a complimentary software upgrade that takes about 30 minutes.  

With regard to a recall by Volkswagen America involving the same DSG problem in the U.S., Volkswagen China said that conditions were different and that vehicles sold in China only affected vehicle comfort, not safety, thus a recall was deemed unnecessary.

In May 2012, Volkswagen China announced a measure to extend the warranty of the DSG as a resolution. For owners with vehicles equipped with DQ200 (7-speed) and DQ250 (6-speed) DSG transmissions produced prior to December 31, 2012, the warranty was extended to 10 years or 160,000 km.

The warranty extension was simply a compromise and did not completely resolve the DSG problems owners have been experiencing, because as we know from numerous channels, the same problems remained for many owners even after the software upgrade. What then is the use of extending the warranty if it does not take care of the problem?

Owners are more interested in whether the problems can be resolved completely. The recall itself or a warranty extension is simply a step in the process.

The DSG storm died down after the warranty extension was announced, and media interest in the issue waned. Problems reflected by owners no longer triggered widespread concern from the public, the lawyers went behind the scenes and the AQSIQ could not provide a clear conclusion.

Then came this year’s “315 Gala” that exposed the old wound. Less than 24 hours later, Volkswagen China announced that it would issue a voluntary recall. Volkswagen China clearly took a much different stance this time.

Which Volkswagen China should we believe?  

If the DSG problem in fact did not pose any risks to vehicle safety, then Volkswagen China could have simply refused to execute the recall demanded by the AQSIQ.

The Articles of Administration on the Recall of Defective Automobiles, which went into effect on January 1, 2013, stipulates that “manufacturers that deem their products not defective can file an objection to the relevant product quality supervision department under the State Council within 15 days of the recall notice and provide related proof. The said department should organize third party experts bearing no interests to the manufacturers to verify that the related proof is valid, and when necessary conduct technical inspection or appraisal on the affected products.”

But Volkswagen China went ahead with the recall anyway. Is it refuting itself or was it helpless and had no choice but to make the recall?  

Volkswagen China’s acceptance of AQSIQ’s mandatory recall order can only mean that it has been lying all along. If this is so, then Volkswagen China has a problem with its integrity. How can it regain the trust of Chinese consumers in the future?

But for Volkswagen China, the most pressing crisis is not integrity. The more urgent issue at hand is how it will actually take care of the defect.

Owner complaints of the DSG transmission continue to surface. In the ranking of vehicles with the most complaints for the first half of March listed by website 12365auto.com, China’s largest internet platform for automobile defect information and complaints, the DSG problem still appears regularly.

This proves an important point: neither the complimentary software upgrade nor the warranty extension have fundamentally resolved the defect.  

Will it be resolved by the recall that came at last? What happens in a recall? Many manufacturers offer repairs free of charge during a recall and eliminate the defect before consumers can continue to use the vehicles again.

But if Volkswagen China does not actually have any measures to completely take care of the problem and the defect remains, then it will face an even tougher ordeal.  

According to Article No. 19 of the Articles of Administration on the Recall of Defective Automobiles, “manufacturers should adopt timely measures such as revised or supplemental labeling, repair, replacement or return to eliminate the defect for defective products recalled.”

That means if Volkswagen China cannot resolve the DSG defect completely through the recall, Chinese laws will require it to resolve the issue through exchange or even returns.

Therefore, Volkswagen China faces two crises over the recall of the DSG transmission: corporate integrity and risk of having to replace or return the affected vehicles.

(Rewritten by Lei Xing based on author’s blog on sina.com.cn)

 

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