November 14, 2013 / 5:15 PM / 6 years ago

VW hit by 2.6 million vehicle recall focused on China

BERLIN (Reuters) - Volkswagen (VOWG_p.DE) is recalling over 2.6 million cars, about a third of them in China, to fix a variety of problems, a blow to a group striving to overtake Toyota (7203.T) and General Motors (GM.N) as the world’s biggest carmaker.

A Volkswagen logo sign is seen inside the lobby of the U.S. headquarters building of Volkswagen Group of America in Herndon, Virginia, September 18, 2008. REUTERS/Larry Downing

The recall involves vehicles from the German group’s five largest brands by volume, including luxury Audis and core VW passenger cars, and is one of the largest in its history.

Analysts said many of the problems seemed fairly minor, and the recall is a far cry from the almost 19 million vehicles that Japan’s Toyota hauled in from late 2009 to early 2011 due to claims of acceleration problems.

However, they added that any question marks over reliability and inconvenience to customers was bad news.

“Carmakers riding on strong growth like VW must be terribly careful that they don’t pay dearly for that growth by conceding losses on quality,” said Stefan Bratzel, head of the Center of Automotive Management, a private think-tank near Cologne.

VW, which has twelve brands and has boosted deliveries by half over the past six years to 9.3 million cars, said on Thursday it was recalling 800,000 of its Tiguan compact sport-utility vehicle due to the risk of a partial malfunctioning of lights at models assembled between early 2008 and mid-2011.

The Tiguan is one of the Wolfsburg-based company’s three top-selling models worldwide this year.

VW also said it was calling on 1.6 million customers globally to have their cars checked that they are using mineral oil rather than synthetic oil to avoid gearbox-related electronic flaws.

China, the world’s largest car market, will be particularly hard hit.

VW’s Chinese unit said 640,309 vehicles would be recalled from November 25 over the oil checks, while the country’s quality watchdog had already announced on Wednesday that 207,778 Tiguans would be pulled off its roads.

“We sincerely apologize to our customers for any inconvenience caused,” VW Group China said. “We will do our utmost to serve our customers efficiently and in the shortest time possible.”

VW shares showed little reaction to the news, trading 0.9 percent higher at 183.95 euros as of 11.30 a.m. EST.

VW has been growing rapidly in China, where it aims to double manufacturing capacity to over 4 million cars per annum by 2018, the year it also aims to snatch the global sales crown.

It has also taken market share in a declining European market from struggling rivals such as PSA Peugeot Citroen and Fiat and is targeting record deliveries of about 9.5 million this year.

VW said it was recalling 239,000 of its Amarok pick-up truck worldwide as well, due to possible leaks in fuel lines. The action affects models built between 2010 and June 2013.

VW doesn’t sell the Amarok in China, a spokesman said.

At the heart of VW’s global aspirations is a strategy to expand modular production to boost the proportion of parts that can be shared among models and brands, allowing the company to build cars more rapidly and at lower cost.

Analysts have said the strategy isn’t without risk and could expose VW to the threat of massive recalls if a single part, used in millions of cars, fails.

China’s quality watchdog said the recalls would include VW’s imported cars, such as Scirocco, Golf Variant, Golf Cabriolet and the Beetle, as well as those made at its two Chinese joint ventures with FAW (000800.SZ) and SAIC Motor Corp (600104.SS).

FAW will recall the Bora, Golf, Sagitar and Magotan, while SAIC will recall the Touran, Lavida, Superb, Octavia, Passat and Polo.

Reporting by Andreas Cremer and Shanghai newsroom; Editing by Elaine Hardcastle and Mark Potter

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