VW orders U.S. dealers to stop selling cars with new engine

UPDATED: 4/9/14 10:45 am ET - adds VW comments

WASHINGTON -- Citing the risk of a leak in the transmission oil cooler, Volkswagen of America has ordered U.S. dealers to stop selling newer cars equipped with an automatic transmission and VW’s most common engine, the 1.8-liter EA888.

The stop-sale order, sent to dealers Tuesday and obtained by Automotive News, applies to cars produced after Feb. 1. VW spokesman Scott Vazin said the problem arose when a supplier changed the specifications of an O-ring linking the transmission oil cooler to the transmission.

Vazin said VW noticed the leak at the port of entry and decided to issue the stop-sale order. VW has not issued a safety recall, but the company in talks with the National Highway Traffic Safety Administration about how to handle cars that have already been sold.

“In extreme cases it could cause a fire,” Vazin said of the leaky O-ring. “That’s why we’re notifying NHTSA to see where the process goes.”

The German automaker started making the turbocharged four-cylinder engine last year in Silao, Mexico, hoping its fuel economy would help VW expand U.S. sales.

Starting in model year 2014, it was the base engine in the American-made Passat sedan and Mexican-made Beetle, and was available in the Mexican-made Jetta sedan.

VW has not yet disclosed the number of cars affected by the stop-sale order, but Vazin said it is about 25,000. The order was reported earlier by the automotive Web site Jalopnik.

The memo says “a follow-up communication will be released to dealers as soon as possible," and that the required parts will be available "within the next week."

You can reach Gabe Nelson at gnelson@crain.com