Managing Dieselgate Tops New Audi VW CEO’s Agenda

In the month since Volkswagen Group named Marcus Hellman co-CEO of Audi VW Korea, the attorney has been preoccupied digging into charges stemming from the Dieselgate emissions-cheating scandal that has rocked the VW image around the globe.

Audi VW Korea filed suit Feb. 23 with the Seoul Central District Court, seeking to invalidate a 37.3 billion won ($32.6 million) fine for false advertising levied against the German importer on Jan. 23. The fine was the largest ever imposed by Korea’s Fair Trade Commission against any company doing business in the country.

The FTC announced the penalty in December, claiming Audi VW Korea had falsely advertised its vehicles met prevailing emission standards and were clean-burning, energy-efficient vehicles. The court confirmed March 1 that the Audi/ VW lawsuit was filed, but acknowledged only that the importer argued the FTC action was unfair.

The FTC fine was in addition to the 17.8 billion won ($15.5 million) fine levied by Korea’s Ministry of the Environment against the company in August for using emissions-cheating software, and falsifying test results to comply with local emissions and noice, vibration and harshness regulations.

Korea’s laws at the time assessed fines on a per-vehicle basis. Under current regulations the fine would have been significantly higher.

Analysts believe Audi VW Korea’s legal response to the false-advertising fine is only the tip of the iceberg. Hellman and his company’s law firm also must defend several current and former Audi VW Korea executives against criminal indictments.

The executives include Hellman’s co-CEO, Johannes Thammer, former Audi VW Korea CEO Trevor Hill and former VW Korea president Park Dong Hoon, currently CEO of Renault Samsung Motors.

One executive already has been imprisoned. The 52-year-old man, identified only by his surname, Yoon, was arrested in August and sentenced to 18 months in jail for misrepresenting Volkswagen vehicles’ conformity to emissions standards.

Additionally, even though VW Korea has begun a government-approved recall of 27,000 Tiguan models, the importer faces thousands of individual lawsuits filed by Audi and VW owners.

The Seoul Central District Court on Feb. 24 heard the first 259 of the lawsuits demanding full refunds of vehicle purchase prices, or for payments made under lease contracts.

The plaintiffs allege Korea’s Ministry of the Environment did not make a thorough analysis of the environmental impact of Audi/VW’s planned recall, and argue the Tiguan vehicles still will not satisfy Korea’s clean-air regulations under all driving conditions after the recall.

Audi VW Korea argues the recall has just begun and consumers need more time to properly evaluate the benefits of what the company is offering them.

A second hearing for the plaintiffs will take place in June.

The Tiguan recall is the first plan approved by the Korean government. In total, some 126,000 Audi and VW vehicles were decertified and cannot be sold in Korea until they are brought into compliance.

More than 5,000 individual lawsuits by Audi VW Korea customers are being handled by a Korean law firm, which also has offices in Los Angeles and has engaged a U.S. law firm to work with them.

Audi/VW in late February announced a customer goodwill program under which every customer who purchased a vehicle up to Dec. 31, 2016, could apply for a 1 million won ($873) free vehicle-service voucher. An estimated 270,000 owners stand to be compensated under the voucher plan which will cost Audi/VW 270 billion won ($236 million).

Some customers have denounced the measure as inadequate compensation for the loss of brand value suffered from the emissions scandal.