Wednesday, June 29, 2016

Koreans Want This VW Exec arrested

The war for automaker supremacy has always been a metaphorical blood sport, but now one country is calling for the arrest of an executive leader at another country’s chief automaker. A South Korean court has issued an arrest warrant for a Volkswagen Korea executive, identified as “Yun,” blasting him with five charges including document fabrication and violation of multiple laws.

Three Nations

Yun was also connected to the emissions scandal that VW can’t seem to get beyond. It’s possible these warrants could bring three nations into the mix—South Korea, the United States, and Germany. So far, VW has not commented on this case, which may signal bad news for Yun and anyone else connected to the new string of scandals falling on VW in Korea.
In this instance, Yun is more than a figurehead. The South Korean government has filed lawsuits against multiple other VW executives, fined the company nearly $12 million and demanded VW recall more than 125,000 vehicles.

Class-Action Suit

And the hits just keep on coming for Volkswagen in Korea. More than 4,000 Korean VW customers recently filed a class-action suit against both VW and Audi, demanding they be compensated over the emissions scandal.
The PR problems here for VW are multiple and varied. Even if they settle the class action suit (likely), and those VW Korea executives are punished civilly or criminally (who knows), the company still has to deal with an entire country that has a bad taste in its mouth about VW. And you know what South Korea also has? Resurgent native automakers such as Hyundai and Kia.
With these two major international brands on the rise, this is exactly the wrong time for VW to lose face in the Korean market. That means not only will consumers look at Hyundai and Kia in the States, they are much more likely to buy from the home team when it comes time to compare models against the German brand.

Loss of Trust

Being an outside company already put VW at a competitive disadvantage. But, being a trusted German automaker made up for a lot of that worry. Now, VW has sacrificed that trust, and it looks like the top executives of VW Korea are going to pay a heavy price. How the brand fares is still up in the air…but things don’t look good.
David Milberg is an experienced investment banker who hails from NYC.

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