VW Chief Winterkorn Steps Down After Emissions Scandal

• VW's board to consider successors at meeting on Friday
• Automaker asks prosecutors to open criminal investigation

Volkswagen AG Chief Executive Officer Martin Winterkorn stepped down after nearly a decade at the helm as the automaker became increasingly isolated amid a scandal over cheating on U.S. emissions tests.

“Volkswagen needs a fresh start,” Winterkorn said in a statement Wednesday. “I am clearing the way for this fresh start with my resignation. I am doing this in the interests of the company even though I am not aware of any wrongdoing on my part.”

The move capped a dramatic fall from grace that began last Friday with the revelation that the Wolfsburg, Germany-based company fitted diesel-powered vehicles with software that circumvented air pollution controls, then lied about it to the U.S. Environmental Protection Agency. The 68-year-old CEO, who personally apologized for the affair, was unable to hang on as the stock price plummeted 35 percent over two days and pressure grew from the German government for quick action.

The automaker’s supervisory board will consider successors at its meeting on Friday. Possible replacements as CEO are Matthias Mueller, head of the Porsche brand who is backed by members of the Porsche family, and Herbert Diess, who recently came over from rival BMW, a person familiar with the matter said. Mueller oversees the marque that’s a profit driver for the group. Diess, who joined in July to take charge of the VW brand, helped BMW cut billions of euros in purchasing costs during the global financial crisis.

Criminal Investigation

VW also expects to take further personnel actions in the coming days and has filed a criminal complaint with prosecutors in the German state where VW is based.

Winterkorn, who took over in 2007, led a turnaround that propelled VW from an also-ran that had cut 20,000 German jobs under his predecessor to a global powerhouse with about 600,000 employees that included a stable of 12 brands from Lamborghini supercars to Scania heavy trucks. He expanded aggressively, boosting the number of production sites around the world to more than 100 locations, with an emphasis on China and North America.

Winning Brawls

An avid soccer fan, he was accustomed to boardroom brawls and until Wednesday always came out on top. As chief of the luxury Audi division, where he set in motion a doubling of product offerings with models such as the Q7 SUV, he sparred with then-VW CEO Bernd Pischetsrieder over the direction of the company, eventually leading to Pischetsrieder’s ouster.

Faced with a takeover attempt from Porsche CEO Wendelin Wiedeking, Winterkorn fought off that effort as the global financial crisis undid the suitor’s company, turning the tables on his foe to buy the Porsche sports-car brand instead. His spending spree also included adding the MAN and Scania commercial-vehicle nameplates, as well as Ducati motorbikes.

At his side throughout was his confidante and mentor Ferdinand Piech, the automaker’s supervisory board chairman and patriarch of the Porsche-Piech clan that owns 50.7 percent of VW’s voting stock. When Piech turned on Winterkorn this year, the CEO fought for his job and, to the surprise of many company insiders, won. Piech stepped down in April after Winterkorn rallied support from labor leaders and members of the controlling family led by Piech’s cousin, Wolfgang Porsche.

Investigating Scheme

The new CEO’s top priority will be getting to the bottom of a scheme intended to dupe regulators and consumers about emissions of diesel engines installed in 11 million cars worldwide -- more vehicles than VW sells in a year. The automaker set aside 6.5 billion euros ($7.3 billion) on Tuesday to cover potential costs.

VW’s Achilles heel remains the American market. Even before the revelations of the last week, the VW marque was struggling in the U.S., despite investing $1 billion on a new factory in Tennessee to build a stripped-down, cheaper version of the Passat sedan. The brand’s U.S. sales have dropped, in contrast to growth in the overall market, as VW delayed decisions on building sport utility vehicles that would appeal to American consumers. The automaker is also grappling with a slowdown in China, the company’s biggest national market.

Working in the new CEO’s favor is an automaker that for the moment is financially sound. Volkswagen’s automotive division had net liquidity of 21.5 billion euros at the end of June, and posted record profit of 12.7 billion euros in 2014, helped by its strong presence in China and the expansion of the Audi and Porsche nameplates in the lucrative luxury-car segment. VW surpassed Toyota Motor Corp. in the first half to take the top spot in worldwide vehicle sales -- a goal that Winterkorn set early in his tenure to reach in 2018.

With the diesel-emissions scandal, Winterkorn’s attention to detail has come back to haunt him. Analysts have questioned how a man who would berate staff over the shine on chrome parts could have let something go so awry in the U.S. Winterkorn was known for carrying a measuring stick to check the uniformity of parts, and the automaker would often bring two of a model to an auto show in case he was unhappy with the looks of the one on display.

Winterkorn, who had been Germany’s top paid CEO and was set to get a contract extension this Friday, was intending to give up some of his control of the development process to regional managers, a plan that is now in question.

“I have always been driven by my desire to serve this company, especially our customers and employees,” Winterkorn said in Wednesday’s statement. “‘Volkswagen has been, is and will always be my life.”

Wolfsburg, 2015-09-20

Statement of Prof. Dr. Martin Winterkorn, CEO of Volkswagen AG:

The U.S. Environmental Protection Agency and the California Air Resources Board (EPA and CARB) revealed their findings that while testing diesel cars of the Volkswagen Group they have detected manipulations that violate American environmental standards.

The Board of Management at Volkswagen AG takes these findings very seriously. I personally am deeply sorry that we have broken the trust of our customers and the public. We will cooperate fully with the responsible agencies, with transparency and urgency, to clearly, openly, and completely establish all of the facts of this case. Volkswagen has ordered an external investigation of this matter.

We do not and will not tolerate violations of any kind of our internal rules or of the law.

The trust of our customers and the public is and continues to be our most important asset. We at Volkswagen will do everything that must be done in order to re-establish the trust that so many people have placed in us, and we will do everything necessary in order to reverse the damage this has caused. This matter has first priority for me, personally, and for our entire Board of Management.

Wolfsburg, 2015-09-23

Statement by Prof. Dr. Winterkorn

"I am shocked by the events of the past few days. Above all, I am stunned that misconduct on such a scale was possible in the Volkswagen Group.

As CEO I accept responsibility for the irregularities that have been found in diesel engines and have therefore requested the Supervisory Board to agree on terminating my function as CEO of the Volkswagen Group. I am doing this in the interests of the company even though I am not aware of any wrong doing on my part.

Volkswagen needs a fresh start – also in terms of personnel. I am clearing the way for this fresh start with my resignation.

I have always been driven by my desire to serve this company, especially our customers and employees. Volkswagen has been, is and will always be my life.

The process of clarification and transparency must continue. This is the only way to win back trust. I am convinced that the Volkswagen Group and its team will overcome this grave crisis."

Wolfsburg, 2015-09-23

Statement from the Executive Committee of Volkswagen AG’s Supervisory Board

In a meeting on Wednesday, September 23, the Executive Committee of the Supervisory Board of Volkswagen AG discussed in detail the manipulation of emissions data of Volkswagen Group diesel engines and came to the following conclusions:

1. The Executive Committee takes this matter extremely seriously. The Executive Committee recognizes not only the economic damage caused, but also the loss of trust among many customers worldwide.

2. The Executive Committee agrees that these incidents need to be clarified with great conviction and that mistakes are corrected. At the same time, the Executive Committee is adamant that it will take the necessary decisive steps to ensure a credible new beginning.

3. The Executive Committee has great respect for Chairman Professor Dr. Winterkorn’s offer to resign his position and to ask that his employment agreement be terminated. The Executive Committee notes that Professor Dr. Winterkorn had no knowledge of the manipulation of emissions data. The Executive Committee has tremendous respect for his willingness to nevertheless assume responsibility and, in so doing, to send a strong signal both internally and externally. Dr. Winterkorn has made invaluable contributions to Volkswagen. The company’s rise to global company is inextricably linked to his name. The Executive Committee thanks Dr. Winterkorn for towering contributions in the past decades and for his willingness to take responsibility in this criticall phase for the company. This attitude is illustrious.

4. Recommendations for new personnel will be presented at the upcoming meeting of the Supervisory Board this Friday.

5. The Executive Committee is expecting further personnel consequences in the next days. The internal Group investigations are continuing at a high tempo. All participants in these proceedings that has resulted in unmeasurable harm for Volkswagen, will be subject to the full consequences.

6. The Executive Committee have decided that the company will voluntarily submit a complaint to the State Prosecutors’ office in Brunswick. In the view of the Executive Committee criminal proceedings may be relevant due to the irregularities. The investigations of the State Prosecutor will be supported in all form from the side of Volkswagen.

7. The Executive Committee proposes that the Supervisory Board of Volkswagen AG create a special committee, under whose leadership further clarifying steps will follow, including the preparation of the necessary consequences. In this regard, the Special Committee would make use of external advice. Further details about this will be decided at the Supervisory Board meeting on Friday.

8. The Executive Committee is aware that coming to terms with the crisis of trust will be a long term task that requires a high degree of consistency and thoroughness.

9. The Executive Committee will work on these tasks together with the employees and the Management Board. Volkswagen is a magnificent company that depends on the efforts of hundreds of thousands of people. We consider it our task that this company regains the trust of our customers in every respect.

Volkswagen manipulated emissions tests in Europe as well as the US, Germany's transport minister has said.

Alexander Dobrindt said: "We have been informed that also in Europe, vehicles with 1.6 and 2.0 litre diesel engines are affected by the manipulations that are being talked about."

He added it was unclear how many vehicles in Europe were affected and confirmed random tests would be carried out on cars made by other manufacturers.

The VW controversy is centred on "defeat devices" it used to fool US emissions tests on diesel cars into believing the vehicles met environmental standards.

The company admits the software, which switches engines to a cleaner mode during official testing, may have been fitted in 11 million vehicles worldwide.

VW has not responded to Mr Dobrindt's claim.

At least 482,000 cars are to be recalled and the carmaker could face penalties of more than $18bn (£11bn) in the US alone.

:: VW Emissions Scandal: Key Questions Answered

Volkswagen will start firing people responsible for manipulating the tests on Friday, sources told the Reuters news agency.

The carmaker's supervisory board will give initial findings from an internal investigation into who was responsible as well as revealing a successor to chief executive Martin Winterkorn, it reported.

Reuters later reported the research and development bosses of Audi and Porsche and its top manager in the US will be dismissed.

Audi's Ulrich Hackenberg, Porsche's Wolfgang Hatz and US chief executive Michael Horn will be sacked, a source told the news agency.

German weekly Spiegel reported that VW's brand development chief Heinz-Jakob Neusser will also go.

VW, Porsche and Audi all declined to comment on the report.

The full global impact of the scandal is not yet known, with UK drivers waiting to find out if their cars are affected.

It has been warned the scandal could lead to Britain's biggest ever class action lawsuit.

Bozena Michalowska-Howells of law firm Leigh Day said: "If it is shown that this piece of software defeated the European testing then Volkswagen would be in a very similar position as it is in the US and may well then have to call in their cars with all the resulting costs involved.

"This could well lead to one of the largest group claims ever in this country against Volkswagen for the way in which consumers may have been misled in relation to their vehicle."

:: The End Of Europe's Love Affair With Diesel?

Mr Winterkorn quit VW on Wednesday, saying he accepted responsibility for "irregularities found in diesel engines" but had not been aware of any wrongdoing.

VW has set aside an initial £4.7bn to cover the fallout and "win back the trust" of customers.

Former Volkswagen CEO Martin Winterkorn could receive 60 million euros payoff

Sept 24, 2015 10:36 a.m. ET

BERLIN-- Martin Winterkorn, who stepped down as chief executive of Volkswagen AG Wednesday due to its widening emissions scandal, could receive compensation of up to EUR60 million ($66.9 million), depending on how the company calculates his severance.

Winterkorn stepped down days after VW admitted to systematically manipulating emissions tests on its diesel-powered cars. Up to 11 million cars could have been affected by the scandal.

According to Volkswagen’s annual report, there are two sources of compensation for Winterkorn upon his departure, as well as perks such as the use of a company car, as long as he is collecting a pension. By the end of 2014, he had amassed a pension worth EUR28.6 million.

But the report also describes a severance payout rule that gives a departing member of the management board the equivalent of a maximum of two years of his total remuneration.

In 2014, Winterkorn’s severance entitlement totaled EUR15 million--a combination of a fixed salary of EUR1.5 million and various benefits and incentives, according to the company’s 2014 annual report.

BMW stock tumbles after report of high emissions

A sudden wave of scrutiny over emissions threatened to engulf BMW after a German magazine reported Thursday that one of the luxury automaker's diesel vehicles emitted 11 times the amount of nitrogen oxides acceptable in Europe.

The German automaker's shares tumbled 7% as of 8:24 a.m. ET following Auto Bild magazine's report that the International Council on Clean Transportation had discovered curiously high emissions on the BMW X3 xDrive 20d crossover vehicle.

The news comes after an ICCT investigation conducted in cooperation with West Virginia University researchers uncovered irregularities in the emissions performance of Volkswagen diesel cars.

That prompted a U.S. Environmental Protection Agency investigation that caused Volkswagen to admit it had rigged 11 million cars worldwide with cheating software, a scandal that has crushed the German automaker's stock, severely damaged the VW brand and triggered costs of more than $7 billion.

To be sure, while Volkswagen intentionally misled regulators by installing the so-called "defeat device" on diesel vehicles, it's far from clear whether BMW or other automakers have used similarly deceptive software.

BMW issued a forceful statement denying any wrongdoing, saying in an email to USA TODAY that it "does not manipulate or rig any emissions tests."

"We observe the legal requirements in each country and adhere to all local testing requirements," BMW said. "When it comes to our vehicles, there is no difference in the treatment of exhaust emissions whether they are on rollers (eg. test bench situation) or on the road."

The automaker said it is "not familiar with the test mentioned by Auto Bild" but will ask ICCT "for clarification of the test they carried out."

ICCT research has previously suggested that excessive NOx emissions — which can exacerbate respiratory conditions such as asthma — may not be exclusive to Volkswagen.

In a report earlier this month, ICCT said that on-road testing of 32 European diesel cars from 10 automakers found that the average vehicle was generating NOx emissions at twice the regulatory limit.

Some "manufacturers seem to be focusing on meeting emission limits over the current test cycle while neglecting real-world operating conditions,"ICCT study co-author Vicente Franco said in a statement.

Volkswagen has taken steps to help out the dealership, Murphy said. That includes guaranteeing reimbursement for sales objectives for two quarters whether or not the goals are met and waiving the interest the local franchise normally pays on unsold cars on their sales floor, he said.

Volkswagen rigged emission tests on about 2.8 million diesel vehicles in Germany, the country's transport minister said on Friday, nearly six times as many as it has admitted to falsifying in the United States.

His comments, pointing to cheating on a bigger scale than previously thought, deepened the crisis at the world's largest automaker as its supervisory board held a crucial meeting.

The board is widely expected to name Matthias Mueller, the head of its Porsche sports-car division, as chief executive to replace Martin Winterkorn, who quit on Wednesday, and at least four senior executives are expected to be purged.

Shares in the German company, which had started to steady after sharp falls earlier this week, were down 4.5 percent at 1335 GMT after Bloomberg also reported that executives in Germany controlled aspects of the manipulated U.S. tests, citing three people familiar with the U.S. business.

Volkswagen is under heavy pressure to show it can get to grips with the biggest business-related scandal in its 78-year history.

Mueller, 62, would represent part of the fresh start that Winterkorn said was needed when he stepped down.

The board will also dismiss the head of its U.S. business, the top engineers of its luxury Audi and Porsche brands and the head of brand development at its VW division, sources added, aiming to show it is acting decisively to end the crisis.

Volkswagen shares have plunged as much as 40 percent, wiping tens of billions of euros off its market value, since U.S. regulators said last Friday it had admitted to programming diesel cars to detect when they were being tested and alter the running of their engines to conceal their true emissions.

The scandal keeps growing. German transport minister Alexander Dobrindt said on Thursday Volkswagen had also cheated tests in Europe, where its sales are much higher, and on Friday put the number of affected vehicles in Germany at 2.8 million.

Regulators and prosecutors across the world are investigating the scandal.

The wider car market has been rocked, with manufacturers fearing a drop in sales of diesel cars and tighter regulations, while customers and motor dealers are furious that Volkswagen has yet to say whether it will have to recall any cars.

"VW needs to be very open about what has happened, how it was possible that this could happen to make sure that this never happens again in the future," said a leading Volkswagen shareholder, underlining the importance of the board meeting.

"These are priorities that should override all other considerations at the moment."

The task facing Mueller, if his selection is confirmed, is huge. The company said on Tuesday 11 million vehicles worldwide were fitted with the software that allowed it to cheat U.S. tests, while adding it was not turned on in the bulk of them.

Analysts hope that on Friday it may at last say which models and construction years are affected, and whether cars will need to be refitted.

They also expect it to announce a full investigation of the scandal, with German newspaper Handelsblatt saying it planned to hire U.S. law firm Jones Day to lead a no holds barred inquiry, and to give the outlines of a new management structure likely to be less centralized, but with a clearer system of checks.

TOUGH TIMES AHEAD

Volkswagen has long been seen as a symbol of German industrial prowess and the auto industry is one of the country's major employers and a key source of export revenue.

Earlier this month, Volkswagen delivered a presentation to investors at the annual Frankfurt motor show entitled "Stability in Volatile Times". Now Chancellor Angela Merkel is urging it to act quickly to restore confidence in the Volkswagen name.

Frank Schellenberg, a taxi driver in Wolfsburg where the carmaker employs around 70,000 people, said locals felt betrayed and feared the worst.

"They have lost any contact with the real world, the customers who have been buying their cars in good faith," he said, pointing to the firm's 13-storey administrative building. "Everyone in Wolfsburg is expecting tough times and job cuts."

Half a dozen Greenpeace protesters were outside Volkswagen's Wolfsburg plant on Friday, ‎waving banners saying "No more lies!" in front of three diesel-engine VW Golf hatchbacks.

Evercore ISI analyst Arndt Ellinghorst said he would welcome the appointment of Mueller, a former head of product strategy and close to the Piech-Porsche family that controls Volkswagen.

But Bernstein's Max Warburton questioned whether a man who has spent more than three decades at the company was the right man to signal a break with the past. He favors Herbert Diess, a former research and development chief of rival BMW who was hired to run the VW brand in December.

"VW needs to think big and bold," Warburton said, urging the new CEO to offer to buy back and scrap almost 500,000 diesel cars sold in the United States, which would cost about $6 billion, as well as suspend the 100 engineers most closely associated with the affected engines and software.

Another top Volkswagen shareholder said it would have been better for Winterkorn to sort out the crisis before handing over to a successor, pointing to how oil company BP managed its recovery from the 2010 Gulf of Mexico oil spill.

"I would have preferred Winterkorn to have stuck around for another month or so, through the worst of the storm, then the company appoint another CEO."

Environmentalists have long complained that carmakers game the vehicle testing regime to exaggerate the fuel-efficiency and emissions readings of their vehicles.

The International Council on Clean Transportation, one of the research groups that helped uncover Volkswagen's deception, has published new data showing carbon dioxide emissions in European road tests were on average 40 percent higher than the laboratory results advertised in car sales literature.

European politicians on Wednesday voted to speed up a tightening of testing rules.

Breaking: Matthias Mueller named as new Volkswagen CEO

Embattled German carmaker Volkswagen officially named Porsche boss Matthias Mueller its new CEO on Friday.

He replaces Martin Winterkorn, who stepped down following revelations of the auto giant's manipulation of emission tests for its diesel cars.

The 62-year-old has been in the Volkswagen fold for years, working under the Audi brand from 1977 after studying information technology and toolmaking in his native Germany. At Audi, he headed up system analysis, product management and later the Lamborghini product line, before moving to Volkswagen's Wolfsburg headquarters to lead VW's projects department.

At Porsche, which he has led since 2010, Mueller is credited with helping deliver record revenue and profit, with deliveries jumping 17 percent in 2014 from a year earlier.

If successful, Mueller faces a tough job at the at the helm: Volkswagen will now try to navigate its way through civil suits and multi-national investigations over allegations it deliberately tricked regulators who were testing emissions levels on diesel vehicles issued between 2008 and 2015.

The appointment of the new CEO ushers in a new leadership pairing, with former chief financial officer Hans Dieter Poetsch set to take on the VW's chairman role in November. Volkswagen is still searching for his replacement.

Former chairman Ferdinand Piech resigned in April after losing a leadership battle with Winterkorn, who he all but publicly criticized the former chief exec for his performance at VW.

One other possible candidate for the top job is Herbert Diess, who was hired by Volkswagen to take over Winterkorn's former positions as the head of VW's passenger cars brand back in July.

The 56-year-old joined Volkswagen from BMW, where he last served as Chief Development Officer but also played roles in long-term and structural planning, plant management, purchasing and supplies over his 11 years at the company.

He studied automotive engineering in his native Munich, before going on to head the local university's department of auto assembly, and in 1990 moved onto work at Robert-Bosch.