Volkswagen's Massive Global Recall - Analyst Blog

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Volkswagen AG ( VLKAY ) is recalling 2.64 million vehicles across the globe to fix certain drive system and electronic problems. The company revealed that the use of synthetic oil in the seven-speed dual-clutch DQ200 gearbox of certain cars and vans can result in electric malfunctions in hot weather conditions. Volkswagen will be replacing the synthetic oil with mineral oil in the gearboxes of 1.6 million cars and vans. Customers will not have to incur any charges for this replacement.

Out of these 1.6 million vehicles, Volkswagen is recalling 640,309 cars and minivans in China. This is for the second time the German automaker is recalling vehicles from China.

Vehicles that will be recalled in China include Volkswagen Scirocco 1.4Ts, Golf wagons, Golf sport convertibles, Beetle 1.4Ts and 1.2Ts, and Audi A1s and A3s, which were imported from Jan 28, 2009 to Jul 4, 2013.

The recall also includes vehicles produced by Volkswagen's joint venture in China with state-owned First Auto Works. These vehicles are Boras, Golfs, Sagitars and Magotan sedans and Touran minivans.

Volkswagen is also recalling 800,000 Tiguan vehicles globally to replace a fuse that can cause failure of the vehicle's light. The recall is meant for vehicles produced from 2008 to mid 2011. The automaker also assured that it will only take a few minutes to fix the problem. Moreover, the automaker is recalling 239,000 Amarok pickups to repair a fuel leak problem.

This is not the first time that Volkswagen is recalling vehicles from China this year. In March, the company had recalled 384,181 vehicles to fix problems in the gearbox.

China offers a large market for Volkswagen with huge sales opportunity. Good performance of the company in this region helps it to overcome the sluggish sales in other parts.

Recently, Toyota Motor Corp. ( TM ) recalled 33,000 cars, pickup trucks and commercial vehicles globally to fix a problem related to the engine. The vehicles being recalled include Land Cruiser Prado mid-size SUV and several larger vehicles. While most of the recalls were made in Japan, the automaker also recalled 4,000 four-cylinder Tacoma pickup trucks of 2013 and 2014 base model in the U.S.

Currently Volkswagen carries a Zacks Rank #5 (Strong Sell). Other stocks in the automobile sector worth considering include Daimler AG ( DDAIF ) and Fuji Heavy Industries Ltd. ( FUJHY ). Daimler is a Zacks Rank #1 (Strong Buy) stock, while Fuji carries a Zacks Rank #2 (Buy).



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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: DDAIF , TM , VLKAY

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