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Volkswagen recalls 1,950 diesel vehicles in China

Beijng :Scandal-hit German carmaker Volkswagen today said it will recall 1,950 diesel vehicles in China to rectify engine software that cheats on emissions tests, following warnings from China’s top quality watchdog.

The company is working on developing a remedy for customers and will submit solutions to Chinese authorities soon, the world’s largest automaker said, citing a report submitted by Volkswagen to the General Administration of Quality Supervision, Inspection and Quarantine (AQSIQ).

The announcement follows warnings from China’s top quality watchdog about 1,946 imported Tiguan and four imported Passat powered by EA189 diesel engines, which are affected in the emissions scandal.

Volkswagen should recall the affected vehicles as soon as possible and keep Chinese authorities updated to protect Chinese customers’ interests, state-run Xinhua news agency reported.

On September 18, the US Environmental Protection Agency (EPA) issued a Notice of Violation (NOA) of the Clean Air Act to Volkswagen (Volkswagen AG, Audi AG, and Volkswagen Group of America) accusing the company of installing software that circumvented emission control tests in about half million diesel cars sold in the US since 2008.

The software, which the EPA called a “defeat device”, only runs the full emission controls when the car is being tested.
During normal driving, however, the car will emit nitrogen oxide of up to 40 times the standard.

The automaker, which offered its “sincerest apologies” to Chinese customers, has accepted installing software designed to cheat emissions tests.

The company said 11 million vehicles were affected worldwide and has already appointed a new chief executive and chairman after the emissions tests in the US.

It has launched a thorough investigation into the scandal, but new chairman Hans Dieter Poetsch said last week that answers would take “some time”.

The automaker recalled 384,000 vehicles in China two years ago to fix gearboxes after state television publicised complaints about them.

The international credit rating agency Standard and Poor’s today cut the long-term debt rating of German auto giant Volkswagen in the wake of the pollution-cheating scam involving its diesel vehicles.

S&P said in a statement it was downgrading VW’s long-term debt rating by one notch to A- and could cut it “by up to two more notches” again in future in face of the “wide-ranging negative credit consequences following its admission that it installed software designed to manipulate diesel engine exhaust emissions in 11 million vehicles.”

“The downgrade reflects our assessment that VW has demonstrated material deficiencies in its management and governance and general risk management framework,” the analysts argued.

“We believe that VW’s breach of US environmental law and potential other laws outside the US represents a significant reputational and financial risk to VW over the medium term,” the statement continued.

Last month, VW became embroiled in the biggest scandal in its history, when US authorities accused it of fitting diesel cars with devices that can switch on pollution controls when they detect the car is undergoing testing.

They then switch off the controls when the car is on the road, allowing it to spew out harmful levels of emissions.

VW has already said it will set aside 6.5 billion euros (USD 7.4 billion) in provisions in the third quarter, but its new chief executive has said that sum would only cover the costs of repairs, and that much more was needed to meet potential fines and damages arising from any lawsuits.

“The costs of remediation, compensation, litigation, and potential fines could, however, be substantial and well in excess of this level,” S&P said.

The analysts acknowledged that the full facts and consequences of the deception “may not be known for months, even years. We expect VW to experience a negative impact on its sales volumes, prices, and margins.