Korea Dieselgate Case May Be Sputtering to End

The flight of Audi Volkswagen Korea’s CEO to Germany and his refusal to return to South Korea may mean all the defendants in the local Dieselgate saga are off the hook.

With little fanfare, the Seoul Central District Court heard charges July 19 against a group of Audi VW executives who had been indicted under Korea’s Clean Air Act for their alleged roles in selling vehicles equipped with emissions-test-cheating devices and violating other laws by allegedly condoning or ordering falsification of noise, vibration and harshness certification reports.

However, the main suspect among them, Audi-VW CEO Johannes Thammer, was a no-show. He had flown to Germany and refused to return to Korea to stand trial.

Jae-kyun Jung, Audi-VW Korea vice president and executive director, did show up and told the court Thammer had traveled to Germany on a 4-day business trip June 5.

Jung said Thammer e-mailed him June 8 to say he could not return to Korea because of health problems.

It should be noted Thammer has resigned his post with Audi VW Korea, effective July 31, to take a position at VW headquarters. Legal analysts believe if prosecutors really meant to press their case, they would have considered his resignation from the Korea post and barred his trip to Germany.

They believe their silence amounted to tacit approval for Thammer to exit Korea and diffuse a legal proceeding that had lost its steam and public appeal.

Thammer is the key figure in the case against seven defendants that include VW Korea President Thomas Kuehl; former VW Korea President Park Dong Hoon, who now heads Renault Samsung Motors; and former Audi VW CEO Trevor Hill.

Prosecutors say they will consult with their German counterparts regarding Thammer’s refusal to appear in court, but legal analysts believe it is unlikely they will attempt to take the complicated step of trying to extradite him to Korea.

Although the defendants were indicted, none have been arrested. The court declined prosecutors’ request to jail them, saying the evidence did not warrant holding them in custody.

All of the executives had been placed on a travel ban when they were indicted early this year. Initially, none could leave Korea without approval by the court, but the ban later was lifted and the case dragged on without publicity.

One former VW executive identified only as Yoon was tried, convicted and in January was sentenced to 18 months in prison for falsifying NVH certification for VW vehicles. Because of that, prosecutors indirectly implied the top-ranking German officials also could be jailed for their Dieselgate roles.

They were questioned in the notorious VIP floor of the Seoul Central District Prosecutors’ building, the same chambers where former President Park Geun-hye was grilled following her impeachment this year by the National Assembly.

It should be noted Koreans, by their own admission, are emotional people. The highly publicized emissions-cheating case, the ban on sales of 80 variations of some 32 VW and Audi vehicles, decertification of some 209,000 vehicles already on the road, charges of falsifying NVH compliance certificates and fines for false advertising all had the public riled against the German automakers.

In addition to prosecutors vowing to take down the accused executives, more than 5,000 Audi or VW owners filed personal-injury lawsuits against the companies, seeking full refunds of their vehicle purchase price or the amounts paid for vehicle leases.

Some citizens, not necessarily Audi or VW owners, even filed lawsuits claiming emotional stress and injury because they had been breathing air in an environment the Audi and VW vehicles allegedly polluted.

Yet, when VW managed to get a recall approved for 27,000 of its Tiguan SUVs in January, very few owners applied for a software fix that would reduce emissions but would render their vehicles slightly less powerful and fuel-efficient. More than 600 owners went as far as joining in a lawsuit to try to ban the recall program.

The Dieselgate saga has since been overshadowed by the months-long public demonstrations against Park, who eventually was impeached and removed from the presidency amid corruption allegations. That was followed by a presidential election campaign that grabbed headlines and by the election of a new president, Moon Jae-in, which put the public focus on him.

If that was not enough to overshadow Dieselgate, the North Korean regime began firing medium- and long-range intercontinental ballistic missiles and ballyhooing its progress in developing missile-borne nuclear warheads.

So Dieselgate seemed to go into a deep sleep. There was no media frenzy when the Audi VW Korea executives appeared in court July 19. Only one major newspaper in Korea published a report about the case.

So with Thammer skipping out and refusing to return to face his accusers in court, prosecutors can let the case against the Audi VW executives slide and allow it to disappear without negative feedback from the public.

Meanwhile, two of the accused Audi VW Korea executives have moved on or are in the process of moving on to other companies or assignments.

Kuehl has resigned as VW Korea CEO, effective Sept. 30, and will take over as president of Nissan India. Kuehl leaves the country legally unscathed by Dieselgate, although he was questioned for hours by prosecutors and then was harangued and interrogated on public television when he appeared before Korea’s National Assembly last year.

Hill, a former CEO of Audi VW Korea from 2007 to 2012, returned to his native South Africa in June as CEO of Audi South Africa.

Park, former VW Korea chief from 2007 to 2012 who once was chairman of the Korean Automobile Importers and Distributors Assn., has been CEO of a resurgent Renault Samsung Motors since 2016.

Meanwhile, except for the 5,000 or more personal lawsuits, and Audi VW Korea’s ongoing efforts to get their planned recalls approved, the Korean public appears to have lost interest in the plight of the two German automakers.

But they haven’t lost interest in buying German automobiles.

The temporary Audi VW downfall in Korea has worked to the advantage of rival Mercedes-Benz Korea, which is racking up new sales records and is the country’s best-selling vehicle importer by far.

The company sold 7,783 vehicles in June, the highest total for any foreign automaker in any month in Korea. The result accounted for fully one-third of all import vehicle sales in June.

Mercedes-Benz Korea’s sales for first-half 2017 tallied 37,723, a 35% rise over like-2016, when it also ranked first with a record 56,343 vehicles sold. The 2016 tally represented one-quarter of all imported vehicles sales in Korea, while total import sales were off 7.6% from the previous year. The decline reflected the government ban on most Audi and VW vehicles.

However, parent Mercedes-Benz is being investigated in Germany for allegedly using a diesel-emissions cheat device on two of its engines.

Korea’s Ministry of the Environment says if the allegations in Germany are proved, it will halt sales and order the recall of all Mercedes-Benz models equipped with those engines.

Analysts believe Audi and VW can rise again once the recalls are approved and the two automakers are permitted to sell their full range of vehicles in Korea. It is moving in that direction under the leadership of its new CEO, Marcus Hellmann, who came on board Feb. 1.

Hellmann, a highly regarded lawyer, previously handled legal affairs for VW’s international enterprises out of the automaker’s Wolfsburg headquarters. He gained expertise with the legal aspects of Dieselgate before being sent to Korea to save Audi VW by winning approval for its recall plans and by getting all vehicles recertified and back on the local market.

In May Hellmann brought in two veteran compliance officers from Germany, Johann Hegel and Martin Bahr. Both have been working to streamline and upgrade the local certification processes for meeting Korea’s rigid environmental and NVH standards.

All of the executives have been permitted to carry on business as usual, and legal experts expect the case against them will just quietly go away. It appears they will be vexed no longer by government agencies stirring public ire against the Audi and VW brands.