No recall: failure to act

Just before New Year's Eve last year, Luke Ray was driving his wife's 2010 Golf. He was like those starry-eyed Golf owners in the TV ads. He loved the car. His wife, Min, adored it. "My wife chose the sporty bits and the nice wheels," says Ray. "It was an aspirational thing to get a Volkswagen. We stretched a little bit to get it."

In the rearview mirror Ray could see a Toyota Hilux was a tad too close. But the bigger problem for Ray was that the Golf carried an intermittent and unpredictable fault that causes a "false neutral", where the engine continues to run but the accelerator fails.

In countries such as the United States, China and Singapore, this is one of at least two well-known faults with some Volkswagen high-tech direct-shift gearboxes (DSG). Overseas, the company has admitted that this "false neutral" can be traced back to the gearbox's mechatronics unit.

But none of that knowledge would help Ray, as his car ground to a halt on a Point Cook roundabout with his wife and three-month-old son Joss as passengers. The Hilux smashed up the rear of his beloved Golf. "It was a pretty nasty smash," says Ray.

The Ray family car was tested twice after its sudden loss of power and diagnostic tests at Essendon Volkswagen showed nothing was wrong. Then suddenly, last week, the dealer rang Ray and said they knew what the problem was - it was the mechatronics unit.

Luke Ray is just one of more than 300 owners of Volkswagen-made cars - including Audi and Skoda brands - who have reported a sudden and frightening loss of acceleration while driving their cars. Almost all of them say they felt lucky to escape an accident, and many were in heavy traffic or travelling at 100km/h when their cars lost power.

Until the Victorian coroner began to examine the death of bride-to-be Melissa Ryan, who died driving her 2008 Golf on the Monash Freeway in 2011 after being rear-ended by a truck, the large majority of these 300 believed their experience was probably a one-off.

Ryan's family and the truck driver point to the Golf's dramatic loss of speed as a possible factor in her death. This is obviously a decision for the coroner - Volkswagen points out Ryan was driving a manual and only about 10 per cent of the people who have come forward to Fairfax Media were driving manuals when their cars lost power.

But regardless of the coroner's finding, news of Melissa Ryan's death unleashed a wave of pent-up anger and complaints about Volkswagen that has been so devastating to its brand that Volkswagen Australia's managing director John White this week launched an "active service campaign" to contact about 4000 owners of cars with known faults. But the company's actions have fallen short of a recall.

Meanwhile, the Department of Infrastructure and Transport is investigating the flood of complaints. Last year, Volkswagen sold 72,870 cars in Australia, including its Skoda and Audi brands.

The department - which is Australia's key vehicle safety regulator - now faces serious questions about its failure to act on Volkswagen's safety issues. Dozens of motorists have told Fairfax Media that they complained to the department about unexpected deceleration. In a letter obtained by Fairfax Media, the department told one complainant that a vehicle suffering a sudden loss of power "can coast to a stop safely" and even without the power steering can still be steered "quite easily at speed".

Meanwhile, customers are asking why Volkswagen Australia refused to issue a recall for several known problems with the DSG transmissions - issues that have been raised since at least 2009 when Volkswagen of America recalled cars under a customer service program. Volkswagen in the US was forced to move after an adverse federal authority investigation and media reports about the stalling, which customers called the "flash of death" after a dashboard warning light that appears as their car loses power.

The biggest DSG recall came earlier this year when Volkswagen had to recall almost 400,000 cars after an investigation by a Chinese television program. The recall was also urged by the Chinese government. Recalls in Singapore, Japan, Malaysia and Taiwan followed. Volkswagen says Australia does not have the same DSGs as the Chinese-made models, but independent Volkswagen DSG specialist Guy Harding said Australian cars carried the same DSG components as the Singapore market.

Customers are also furious that Volkswagen did not publicly address a known problem with its diesel injectors. A fault in the injector can lead to total power loss while driving. In Britain, the diesel injector recall affected 78,800 Golfs, Passats and Tourans made between 2006 and 2010. Volkswagen alerted customers to the problem.

But in Australia, instead of a recall, Volkswagen quietly issued a "campaign" through its dealer network. This meant that drivers were unaware of the potential problem and many only found out when their cars broke down, often in dangerous situations.

"All I wanted was for them to explain why they hadn't alerted their customers to this potentially lethal problem," says David Grant, whose wife was almost rear-ended by a truck when her diesel 2007 Golf suddenly lost power on the freeway near Wollongong last year. Grant says the Volkswagen mechanic diagnosed the injectors as the problem.

Volkswagen Australia says people were not widely notified about the injector service campaign because it was not a safety issue.

As well as towing costs, some drivers have told Fairfax Media that they paid thousands of dollars to fix the injectors and DSG-related issues. Twenty people spent more than $1000 on repairs. Of these, nine people spent between $4000 and $10,000. Many were given quotes of between $4000 to $11,000 to get the problems fixed, but after the customers stood up for themselves, it was covered under warranty.

Meanwhile, other customers left stranded by a diesel injector failure were never told by Volkswagen dealers about the service campaign, and instead were told the company would fix the fault for free "as a gesture of good will" or because they were "nice customers". These people were grateful because they never knew it was an inherent fault in the vehicle.

Juergen Nelles, who drives a 2007 diesel Passat that ran out of power on the Tullamarine Freeway, was told by a Volkswagen dealership last year that the injectors would cost him $5000. He had a look at internet chat sites and found that overseas Volkswagen dealers often replaced them free of charge. South Yarra Volkswagen eventually agreed to replace them at no charge.

It is difficult to understand how, in the age of the internet, Volkswagen and its dealers thought they could behave differently in the Australian market compared to the rest of the world. In days past, customers would have suffered in total isolation. Now chat rooms are full of disgruntled customers banding together and researching overseas faults and recalls.

Based on the accounts of the 300 motorists who have contacted Fairfax Media, Volkswagen Australia seems to have adopted several strategies in the face of rising complaints.

Many Volkswagen drivers said their dealers told them their experience of sudden deceleration was unique. Because it rarely showed up in diagnostic tests and was intermittent, there was often no proof of a fault. Melbourne man Graham Whiteman, whose petrol Eos (DSG) lost power dozens of times - and once in the Burnley Tunnel - was told by Essendon Volkswagen his situation was "unique". But at least eight other motorists with the same problem told Fairfax Media they took their cars to Essendon Volkswagen.

Some dealers blamed their customers' driving or, in the case of diesel vehicles, the quality of fuel. Volkswagen was also careful with its language - the diesel injector issue was not a recall but a "campaign". According to a 2011 memo obtained by Fairfax Media, Volkswagen Australia told dealers to "please reinforce the correct description of this action" - a DSG software modification - "as a vehicle update, NOT a recall".

Then when customers threatened to take their grievances public or go to court, Volkswagen made firm legal threats. As Fairfax Media revealed this week, one public servant had his job threatened by Volkswagen's lawyers. A lawyer who complained about his car said that Volkswagen threatened to report him to the Law Institute of Victoria.

It may seem strange that Volkswagen can ignore Australia while issuing recalls for similar faults in other countries, but the system here largely relies on carmakers following a voluntary code. The Federal Chamber of Automotive Industries' Code of Practice for Conduct of an Automotive Safety Recall sets out manufacturers' obligations.

If this system fails, the federal Transport Department can recommend a recall to the Australian Competition and Consumer Commission, which then advises the minister to issue a mandatory recall.

"Unless the minister has issued a mandatory product recall, there isn't a black-and-white legal obligation to recall a vehicle because of a potential vehicle safety defect," says competition and consumer law expert Geoff Carter, partner at Minter Ellison Lawyers.

Luke Ray's problems with his Golf are now fixed. But he's thinking about other Volkswagen drivers. "We got away OK, but it could be a lot worse for someone else. I would urge other people to contact Volkswagen about their mechatronics unit and say they want it looked at."