The Wall Street Journal - The television of the people is driving the car of the people off the road.
Volkswagen VOW3.XE 0.84% said Wednesday it will recall about 384,000 vehicles sold in China because of problems with the gearbox. That follows a report on government mouthpiece China Central Television featuring interviews with a stream of dissatisfied VW customers.
For Western companies operating in China, CCTV has to be taken seriously. Yum Brands YUM 0.36% found that out in late 2012 when CCTV alleged food-quality issues at some KFC restaurants. That triggered an estimated 20% fall in Yum's same-store sales in the first quarter of this year.
The VW recall will take a toll. It is equivalent to about 15% of VW's unit sales in China last year. The company is not commenting on the potential cost, but paying to replace gearbox components will not be cheap. There's also an impact to VW's reputation, which could hurt future sales in a major market. China made up 28% of the group's sales last year by volume, and year-on-year sales growth in China of 18.5% was far ahead of 11.8% global growth.
Still, the recall should be no more than a bump in the road. Toyota's strong recovery from its own recall debacle in the U.S. shows that such problems don't necessarily have a lasting effect.
In China, VW's rivals Toyota, Honda and Nissan are struggling to cope with the impact of continuing diplomatic tensions between Beijing and Tokyo, which have dented sales of Japanese brands there. That leaves them in no position to take advantage of VW's woes.
The recall is a reminder that foreign businesses in China can't expect a smooth ride. But VW should be able to steer clear of a crash.
