S Korea plans tougher penalties for carmakers that hide defects
BMW engine fires spark proposal to increase fines, impose higher punitive damages
The South Korean government plans to strengthen penalties on carmakers that cover up manufacturing defects and expand punitive damages for consumers affected by delayed recalls, amid growing criticism over BMW’s response to dozens of engine fires this year.
The move came after the German carmaker began recalling about 106,000 vehicles in South Korea from August 20 amid mounting public safety concerns. More than 40 BMW cars have caught fire in the country so far this year, raising alarm among drivers of the premium vehicles.
“A series of fires in BMW vehicles has fuelled safety concerns among local consumers,” the transport ministry said on Thursday. “The government has come up with strengthened measures to keep carmakers from delaying recalls and to urge them to solve problems in a timely manner.”
Under the new proposal, the government will impose a penalty equivalent to 3 per cent of an affected model’s sales if an automaker conceals defects, plays them down or delays recalls.
Carmakers would be required to pay more than five times the cost that an owner incurred for a defective vehicle if they failed to take steps to resolve the problems. Carmakers now have to pay about three times the cost in punitive damages.
Currently, executives at automakers responsible for concealing or playing down defects can face a prison sentence of up to 10 years or a Won100m ($89,000) fine. The company has to pay a penalty equivalent to 1 per cent of an affected model’s revenue in the case of delayed recalls.
The ministry said the penalties were strengthened as BMW had come under fire over its allegedly slow response to engine fires. The German company blamed the fires on defects in the exhaust gas recirculation system and was replacing parts in the recalled cars, which covered 42 models produced between 2011 and 2016.
BMW owners in the country are seeking compensation through a collective lawsuit against the carmaker.
The transport ministry said the proposed penalties were enough to put pressure on carmakers, although the amount could increase during the legislation process.
Analysts said the proposed measures were still not strong enough compared with other advanced countries such as the US, where carmakers had to pay up to 10 times the cost for a defective vehicle in punitive damages.