Home > companies > people > Volkswagen CEO Martin Winterkorn in firing line as crisis deepens

Martin Winterkorn’s days as head of Volkswagen AG appeared numbered on Tuesday after the German car maker said a scandal over falsified vehicle emission tests in the US could affect 11 million of its cars worldwide.

The Tagesspiegel newspaper, citing unidentified people on Volkswagen’s supervisory board, said the board would decide on Friday to replace the 68-year-old with Matthias Mueller, the head of the auto maker’s Porsche sports car business.

A Volkswagen spokesman denied the report. Winterkorn did not mention his future in a video message posted on the company’s website in which he repeated his apology for the scandal.

A key Winterkorn ally withheld public support for the under-fire chief executive.

“I don’t want to preempt the upcoming intense deliberations and will not comment on details or any consequences," Stephan Weil, head of the German state of Lower Saxony, told reporters in Hanover when asked about Winterkorn’s future.

Weil, a supervisory board member representing Volkswagen’s second-largest shareholder, earlier this year helped Winterkorn see off a challenge to his leadership by long-time chairman Ferdinand Piech and earlier this month backed the CEO’s contract extension.

Shares in Europe’s biggest carmaker plunged almost 20% on Monday after it admitted using software that deceived US regulators measuring toxic emissions in some of its diesel cars.

The stock tumbled another 20% to a four-year low on Tuesday after some countries in Europe and Asia said they would launch investigations themselves. Preference shares were down 19.7% at €106.1 at 1500 GMT. At the lowest point, the falls in the preference and ordinary shares wiped more than $30 billion off the company’s market value.

Volkswagen said it would set aside €6.5 billion ($7.3 billion) in its third-quarter accounts to help cover the costs of the biggest scandal in its 78-year-history, blowing a hole in analysts’ profit forecasts.

It also warned that sum could rise, adding diesel cars with so-called Type EA 189 engines built into about 11 million Volkswagen models worldwide had shown a “noticeable deviation" in emission levels between testing and road use.

Volkswagen sold 10.1 million cars in the whole of 2014.

The US Environmental Protection Agency (EPA) said on Friday that Volkswagen could face penalties of up to $18 billion for cheating emissions tests. The car maker also faces lawsuits and damage to its reputation that could hit sales, and media reports have said the US department of justice has opened a criminal inquiry into the matter.

The crisis has sent shockwaves through Germany, with Chancellor Angela Merkel calling for “complete transparency" from a company long seen as a beacon of the country’s engineering excellence, and newspapers putting the blame squarely on Winterkorn.

The CEO was due to have his contract extended at a supervisory board meeting on Friday, but is now facing questions over why the scandal wasn’t averted.

Volkswagen, which for several years has been airing US TV commercials lauding its “clean diesel" cars, was challenged by authorities as far back as 2014 over tests showing emissions exceeded California state and US federal limits.

The company attributed the excess emissions to “various technical issues" and “unexpected" real-world conditions.

It wasn’t until the EPA and the California Air Resources Board threatened to withhold certification for its 2016 diesel models that Volkswagen in early September admitted its wrongdoing.

“Winterkorn either knew of proceedings in the US or it was not reported to him," Evercore ISI analyst Arndt Ellinghorst said. “In the first instance, he must step down immediately. In the second, one needs to ask why such a far-reaching violation was not reported to the top and then things will get tough too."

Porsche’s Mueller was promoted to Volkswagen’s executive board on 1 March and was previously its head product strategist. As a management board member of family-owned Porsche SE, he is also close to the Porsche-Piech clan that has a controlling shareholding in Volkswagen.

Winterkorn has built Volkswagen into a global powerhouse since he took the helm in 2007, with brands ranging from budget Seats and Skodas to premium Audis and top-end Lamborghinis. But he has also faced criticism for a centralized management style which some analysts say has hampered the company’s efforts to address long-standing underperformance in North America.

Late on Monday, Volkswagen’s US chief Michael Horn said the company had “totally screwed up" and promised to make amends.

There have been no suggestions so far that other carmakers have engaged in the same practices as Volkswagen. Germany’s BMW and Daimler have said the accusations against Volkswagen did not apply to them.

The EPA said on Monday it would widen its investigation to other auto makers, and French finance minister Michel Sapin said on Tuesday an EU-wide inquiry was needed too.

Reuters European and Asian bureaus contributed to this story.

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