BMW Faces Criminal Probe in South Korea Over Engine Fires
BMW AG is facing a criminal probe in South Korea after investigators concluded that the company concealed fire hazards.
(Bloomberg) -- BMW AG is facing a criminal probe in South Korea after investigators concluded the manufacturer concealed fire hazards and delayed recalls for a problem that has dented sales and its reputation in the Asian country.
South Korea’s transport ministry plans to ask prosecutors to investigate the German carmaker, the ministry said in a statement on Monday. Korea also fined BMW 11.2 billion won ($10 million) for belatedly recalling 22,670 vehicles. The team that’s been investigating BMW since August found defects that could cause coolant to leak and set the engine on fire.
The move threatens to prolong the Munich-based company’s woes in a country where there have been nearly 40 cases of BMW fires reported this year. The carmaker, which has recalled 1.6 million vehicles worldwide over the issue, has seen its sales in Korea fall about 10 percent during the first 11 months of the year as videos went viral of the luxury cars being engulfed in flames.
BMW’s Korea branch apologized in a statement released after the announcement and said it will cooperate with ongoing investigations.
The Korean probe adds to the challenges at BMW as it prepares to begin a new year fraught with potential hazards from a trade war between the U.S. and China, and a drop in car sales in China, the world’s biggest car market. BMW is also raising spending to develop new electric and self-driving vehicles. The strains have been evident, with the Stoxx Europe 600 Automobiles & Parts Index having declined about 27 percent this year and both BMW and rival Daimler AG lowering 2018 profit targets.
The BMW defect also prompted the carmaker to do a voluntary recall of 323,700 vehicles in Europe, with about 96,000 of those in Germany. BMW had said it would begin replacing starting Aug. 20 the EGR coolers and modules in the recalled cars covering 42 models, including the popular 520d and 320d produced between 2011 and 2016.
BMW shares closed 0.1 percent higher on Friday in Frankfurt, the last trading day before the Christmas holiday, trimming losses to 17 percent for the year.
To contact the reporter on this story: Sohee Kim in Seoul at skim847@bloomberg.net
To contact the editors responsible for this story: Young-Sam Cho at ycho2@bloomberg.net, Tara Patel, Anand Krishnamoorthy
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