Global Recall Hits 2.64 Million Volkswagen Cars

24/7 Wall St.

German automaker Volkswagen said on Thursday that it is recalling a total of 2.64 million cars worldwide to fix a variety of problems affecting a number of different models. The recall includes more than 640,000 cars in China, the largest recall that VW has ever had in the Middle Kingdom.

The largest portion of the recall affects 1.6 million VW, Audi, Skoda and Seat brand vehicles for which the synthetic oil used in the dual-clutch gearboxes needs to be replaced by mineral oil. The Chinese cars are included in this category.

Another 800,000 Tiguan compact SUVs have a problem with lighting defects, and another 239,000 pickup trucks are being recalled for a fuel leak issue.

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Volkswagen may really have stepped in it this time. In March the company was forced to recall more than 380,000 cars after China's state television channel reported numerous customer complaints about the cars, including vibration issues, loss of power and other problems. VW has been counting on China to boost it to the number one automaker in the world based on unit sales.

That is a laudable goal, but the reality is that VW needs to pass both Toyota Motor Corp. (TM) and General Motors Co. (GM) in order to get the top ranking, no easy feat. VW's U.S. sales are awful and getting worse, due partly to the company's awful reputation for quality. The carefully monitored Consumer Reports research on vehicle reliability is littered with VW models, particularly given the very small number of models it sells in the United States. The reports showed that the VW Beetle, GTI and Touareg were on the "least reliable" vehicle list. As a brand, it rated number 20, out of a total of the 30 brands measured "less important."

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Now that VW has recalled roughly 1 million cars in China over the past several months, its position as a sales leader in that country has to be in jeopardy. Without huge sales in China, VW has no hope -- none -- of passing either Toyota or GM in unit sales. Another example of wishful thinking replacing a strategy based in reality.

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