Volkswagen CEO Martin Winterkorn resigned on Wednesday, taking responsibility for the German carmaker’s rigging of US emissions tests in the biggest scandal in its 78-year history.
“Volkswagen needs a fresh start - also in terms of personnel. I am clearing the way for this fresh start with my resignation,” Winterkorn said in a statement.
He said he was shocked by events of the past few days, above all that misconduct on such a massive scale was possible at the company.
A five-member executive committee had grilled Winterkorn, 68, since morning at the company’s headquarters in Wolfsburg, Germany. The company was under huge pressure to take decisive action, with its shares down more than 30 percent in value since the crisis broke, and the bad news still coming.
German prosecutors said on Wednesday they were conducting a preliminary investigation into the manipulation of vehicle emission test results at Volkswagen, while French Energy Minister Segolene Royal said her country would be “extremely severe” if its investigation into the firm found any wrongdoing.
German prosecutors said on Wednesday they were conducting a preliminary investigation into the manipulation of vehicle emission test results at Volkswagen, while French Energy Minister Segolene Royal said her country would be “extremely severe” if its investigation into the firm found any wrongdoing.
US authorities are planning criminal investigations after discovering that Volkswagen programmed computers in its cars to detect when they were being tested and alter the running of their diesel engines to conceal their true emissions.
German Chancellor Angela Merkel has urged Volkswagen to move “as quickly as possible” to restore confidence in a company held up for generations as a paragon of German engineering prowess.
But the board is in a tricky situation, with the 68-year-old CEO showing no sign of resigning after a hitherto highly successful eight year reign that saw the company double sales and almost triple profits. Volkswagen passed Toyota in the first half of this year to become the world’s top selling carmaker.
A story in the Tagesspiegel newspaper, denied by Volkswagen, said the board would replace him with Matthias Mueller, head of the automaker’s Porsche sports car business.
Shockwaves
The US Environmental Protection Agency (EPA) said on Friday Volkswagen could face penalties of up to $18bn for cheating emissions tests on some of its diesel cars.
The story has sent shockwaves through the car market, with dealers in the United States reporting people holding back from buying diesel cars and “#dieselgate” trending on Twitter.
Diesel engines account for less than 3% of new cars sold in the US but around half of cars in Europe, where governments have encouraged their use to meet fuel efficiency and greenhouse gas targets.
Their biggest selling point is their fuel economy and low carbon emissions compared to standard gasoline engines. But they also emit far more nitrogen dioxide, a toxic gas blamed for health problems. The suggestion that their emissions in real world conditions are worse than reported in tests could harm the whole sector and alter the future of the car industry worldwide.
Volkswagen said on Tuesday it was setting aside €6.5bn ($7.3bn) to help cover the costs of the crisis.
The US Justice Department has launched a criminal probe, a source familiar with the matter said.
New York and other state attorneys general are also forming a group to investigate, New York Attorney General Eric Schneiderman said, while other countries in Europe and Asia say they will investigate Volkswagens and other vehicles as well.
“Investor’s nightmare”
Deutsche Bank called the scandal an “investor’s nightmare” and cut its recommendation to “hold” from “buy”, predicting rising costs for making diesel cars would wipe out the company’s cost-cutting programme.
Nevertheless, the precipitous two-day collapse in the company’s share price reversed on Wednesday morning. At 1345 GMT, Volkswagen shares were up 7.7% at €114.5, after earlier touching a four year low of €95.51.
Traders say the plunge has stoked speculation that Volkswagen could become a takeover target, with Fiat Chrysler openly looking for a partner, though there is no sign Volkswagen’s controlling Piech-Porsche clan is looking to sell.
Volkswagen is strong in the small US diesel sector and has spent millions on television ads promoting its “clean” diesel cars, central to its strategy to revive its business there.