Dieselgate Continues As Korea Bans VW, Audi Sales

Korea’s Ministry of the Environment bans the sale of 80 variations of 32 basic Volkswagen and Audi models and imposes a 17.8 billion won ($16.1 million) fine on the German automaker.

In total, according to a ministry spokesperson, compliance certificates for 83,000 vehicles sold in Korea since 2009 have been voided.

These actions are in addition to last November’s revocation of certificates for 126,000 vehicles that were equipped with software designed to produce misleadingly favorable emissions ratings. The ministry had ordered a recall of those vehicles, but Audi VW never conducted the recall.

This brings the total number of Audi VW vehicles banned for sale in Korea to 209,000 units, roughly 68% of all vehicles sold by the automaker since 2007.

On the positive side for a former VW Korea CEO, Park Dong-hoon, the ministry did not support a prosecutor’s application to arrest and charge him for complicity in any of the emissions rigging or fraudulent certification matters. Park served as VW Korea CEO from 2005 to 2013 and now is CEO of Renault Samsung Motors, a post he took in April this year after serving since 2013 as executive vice president-sales.

The Seoul Central District Court on Aug. 1 dismissed the Seoul Central District Prosecutor’s Office request for an arrest warrant, saying its review of the situation did not justify charging Park. The court also ruled Park possibly could be denied the right to adequately defend himself with the investigation still ongoing.

Park contends his duties at Audi VW Korea kept him focused solely on marketing and sales and he had neither knowledge nor involvement in any of the vehicle-testing irregularities.

On its VW Korea website, Audi VW apologizes to dealers, partners and customers – in that order – and expresses deep regret the environment ministry had taken what the automaker believes is such stern action.

The statement says company officials are reviewing the decision and might take countermeasures.

Analysts say the countermeasures could include an injunction to override the sales ban that would permit Audi VW to continue selling the vehicles while it seeks recertification, and a lawsuit against the ministry for impugning the Audi and VW brands and damaging both the business and the livelihood of 20,000 employees at the importer’s headquarters and dealerships.

The ministry claims it acted with leniency in imposing the fine. The penalty applied only to vehicle models alleged to have faked emissions-testing documents and not on the models that were decertified for faking only noise, vibration and harshness or fuel-economy documents.

Owners Can Keep Driving Decertified Vehicles

Further, the ministry imposed a previous statutory fine of 1 billion won ($902,000) per basic vehicle model, instead of the newly legislated 10 billion won ($9 million) per-model fine that took effect July 28. Had the new penalty been imposed the fine would have been 178 billion won ($161 million).

The ministry says owners of the vehicles affected by the latest decertification may continue to drive them and also may sell them with no special conditions required.

Despite the saber-rattling of Audi VW officials over countering the ministry’s order, the sales ban was not unexpected.

Korean news media reported over the weekend a ship bound from Bremerhaven, Germany, was ordered not to unload some 3,000 VW vehicles when it docks in Korea sometime this month. Most, but not all, of the 3,000 vehicles are subject to the decertification and the automaker chose to return all of them instead of unload them and sort out the few that could be sold under existing certificates.

The ministry says Audi VW can reapply for certification of all of the affected vehicle models and estimates the process takes about three months after the documents’ submission before a decision is made. A spokesman notes, however, that in this case the investigation and review could take longer because of VW Audi officials’ alleged faking of the data, then attempting to cover it up by attributing the faked documents to administrative errors in completing the submissions.

Possibly further escalating the problem for Audi VW is a petition presented to the ministry by 4,300 Audi and VW owners represented by the Barun Law firm in Seoul. The owners are suing the importer individually, but in the petition they ask the Ministry to order Audi VW to recall all of the vehicles and repay customers for the purchase or lease price.