GM Korea Hopes Chevy Bolt Will Strike Down Bad News

At a time when GM Korea is going all-out to maximize domestic sales to offset declines in export markets, the automaker is reeling from adverse publicity that includes government fines and mandatory recalls for violating safety regulations, startup problems with a new model and a fine for advertising deception.

The latest blow came March 17, when Korea’s Ministry of Land, Infrastructure and Transport reported it had fined GM Korea 1.06 billion won ($938,000) and ordered it to recall 68,126 units of the new Chevrolet Spark minicar and Chevrolet Malibu sedan.

The Spark has a software problem that might permit too much engine oil to be injected under certain conditions, the ministry alleges, and faulty software in the Malibu could cause daytime running lamps to shut off when turn signals are applied.

The ministry says its tests show that if excessive oil is generated, then the Spark’s engine-power output could drop as much as 7.3%, which is below the legally allowable 5%. The ministry says this power drop could pose a safety problem.

However, a GM Korea spokesman tells WardsAuto, “According to our research the (excess) oil cannot get into the engine, so there is no impact on fuel economy, or emissions or driving performance.”

The Spark recall involves all models produced between May 31, 2016, and Jan. 24, totaling 44,657 units. Additionally, 23,469 units of the Malibu sold between May 10 and Oct. 18 last year are being recalled.

The ministry has ordered a fine of 519 million won ($459,000) in the case of the Spark. The amount was determined by calculating one-thousandth of the total sales of the minicar in Korea.

In the Malibu’s case, the 541 million won ($479,000) fine represented one-thousandth of the total value of sales between May 10 and Oct. 18, 2016.

“GM Korea has discovered a potential noncompliance problem in certain units of the Malibu and the Spark,” a company spokesman says. “As a part of our commitment to putting our customers at the center of everything we do, we will handle any and all product matters in the most expedient manner possible.

“Recall service started today (March 17) for the Malibu and will be started March 20 for the Spark at official Chevrolet service centers around the nation.”

A second GM Korea spokesman clarifies the fines and recalls do not involve detected vehicle malfunctions, only possible infractions of local technical standards. He tells WardsAuto Spark vehicles produced in Korea and exported to other markets are not affected.

The fines and recalls come on the heels of a possible quality problem that has delayed customer deliveries of the all-new Chevrolet Cruze in Korea.

Production of the sedan had begun Feb. 6 at the Gunsan plant, only to stop three days later because of possibly defective airbag retainer bolts. GM Korea says it determined some of the bolts might fail under certain conditions and delayed the sales launch until the potential problem was corrected.

Cruze deliveries had been scheduled to launch in late February but were postponed until mid-March. When deliveries resumed GM Korea announced a price cut of up to 2 million won ($1,800) per vehicle, reducing its base price from 18.9 million to 16.9 million won ($16,700 to $15,000). On the upper end of the range prices were cut from 24.7 million to 23.4 million won ($22,000 to $20,750).

If problems weren’t enough to cause headaches among GM Korea executives, Korea’s Fair Trade Commission on March 13 slapped the automaker with a 69 million won ($61,000) fine for alleged deceptive advertising.

According to the commission GM Korea had offered customers free window tinting on virtually every vehicle in its portfolio. However, the agency said the 60,000 to 70,000 won ($53 to $62) actual cost of the tinting already was included in the vehicle price, so customers had prepaid for the window tinting, whether it was ordered or not.

The amounts may seem small but GM Korea also was ordered to issue statements about the false advertising and deceptive pricing issues in mass-circulation newspapers.

Despite the rash of problems and negative publicity in the first few months of 2017, the company remains confident about meeting its record domestic-sales target of 194,000 vehicles.

In 2016 GM Korea had its best domestic sales since its formation in 2002. Local sales tallied 180,275, up 13.8% from 2015.

The automaker expects good news to come out during the 2017 Seoul auto show, where the all-electric Chevrolet Bolt will make its debut in Korea. GM Korea began taking orders for the Bolt March 17.

While the full sticker price begins at 47.8 million won ($42,400), hefty national, regional and local subsidies can lower the base price to 22 million won ($19,500) or less.