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VW faces new crises in South Korea, Bavaria

Sohee Kim
Bloomberg News

Volkswagen AG faced two new fronts in the diesel crisis after South Korea all but banned sales of the automaker’s models and the state of Bavaria threatened to sue over the cheating scandal.

South Korea said Tuesday it would block sales of 80 VW models and fine the company 17.8 billion won ($15.9 million) because the carmaker fabricated documents related to emissions and noise-level tests. The German state of Bavaria, where VW’s Audi brand is based, a few hours later announced plans to sue for as much as 700,000 euros ($783,000) over losses at a state pension fund that owns the automaker’s stock.

The announcements come just a week after VW appeared to be getting its hands around the crisis, reaching a settlement with U.S. federal and state authorities to pay $15.3 billion to cover the cost of getting 482,000 rigged vehicles off the country’s roads. Approval of the agreement advanced Volkswagen’s push to resolve more than 1,000 U.S. lawsuits springing from the diesel-cheating scandal.

Volkswagen fell 5 percent to 118.85 euros in Frankfurt. The stock has plunged 27 percent since the cheating came to light.

The company’s U.S. unit said Tuesday that July U.S. sales for the Volkswagen brand fell 8.1 percent from a year earlier to 28,758. That was narrower than the average estimate of a 20 percent drop in a Bloomberg survey of analysts. The brand’s U.S. deliveries have declined for nine consecutive months. In July, sales surged 40 percent for the Tiguan small sport utility vehicle while the Jetta line, the brand’s best-selling models, was down just 1 percent.

The potential lawsuit in Bavaria stems from VW’s disclosure obligations, which the state believes the automaker did not meet when providing information on the scandal, Tina Dangl, a Bavarian Finance Ministry spokeswoman, said by phone. As a result, the pension fund lost money on its VW holdings, she said. The state plans to file the suit next month. VW declined to comment because the company has not yet received any filing.

In South Korea, the new restrictions affect 83,000 vehicles, the Environment Ministry said in a statement. The 32 certification types for 80 VW, Audi and Bentley models sold in the country have had their approvals withdrawn, it said.

The actions in South Korea are among the most drastic against VW since the revelation by U.S. regulators in September that the carmaker had rigged its diesel models to cheat on emissions tests. The company has set aside about 18 billion euros to cover worldwide costs related to the scandal. While regaining certification in South Korea typically takes three months, the ministry said it may take longer to carry out thorough inspections and visit Volkswagen’s headquarters in Wolfsburg, Germany, if necessary.