- VW's board to consider successors at meeting on Friday
- Automaker asks prosecutors to open criminal investigation
Volkswagen AG Chief Executive Officer Martin Winterkorn resigned after U.S. officials caught the company cheating on emissions tests, leaving the world’s top-selling automaker to appoint a fresh leader to repair its reputation among customers, dealers and regulators around the globe.
Stepping down after almost a decade in charge, Winterkorn said he was accepting the consequences of the mushrooming scandal that has wiped 20 billion euros ($22 billion) off the company’s market value.
Possible replacements include Matthias Mueller, head of the Porsche brand who has the support of the family that controls a majority stake of Volswagen, and Herbert Diess, who recently joined from rival BMW AG, a person familiar with the matter said. Meantime, the company expects more executives to be targeted in the coming days in its investigation, the executive committee of the supervisory board said in a statement, exonerating Winterkorn of being involved in the manipulations. Volkswagen also asked local German prosecutors to assist and open a criminal probe.
“The incident must be cleared up mercilessly, and it must be assured that such things cannot ever happen again,” said Stephan Weil, a member of the board committee and the prime minister of Lower Saxony, a key Volkswagen shareholder. “We are very much aware of the scope of this issue, the economic damage and the implications for VW’s reputation.”
Winterkorn, who was supposed to receive a contract extension on Friday, had a dramatic fall from grace that began last week 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 for nearly a year. The 68-year-old CEO, who had repeatedly apologized for the manipulations, 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.
“He had little choice,” said Erik Gordon, a business professor at the University of Michigan. “The company’s reputation is in tatters.”
Volkswagen shares rose 5.2 percent to close at 111.50 euros on Wednesday, clawing back some of the losses earlier this week.
“Volkswagen needs a fresh start,” Winterkorn said in a statement. “I am clearing the way for this fresh start with my resignation.”
The automaker’s supervisory board will consider successors at its meeting on Friday.
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. The company has about 600,000 employees and owns 12 brands, which makes vehicles ranging from Lamborghini supercars to Scania heavy trucks and Ducati motorcycles. The CEO expanded aggressively, boosting the number of production sites around the world to more than 100 locations, with an emphasis on China and North America.
Recent scandals at Toyota Motor Corp. and General Motors Co. didn’t lead to the removals of those CEOs, who were new to the roles when the crises emerged. In 2009 and 2010, Toyota recalled 10 million vehicles for unintended acceleration, ultimately replacing loose floor mats and sticky pedal mechanisms. Mary Barra in January 2014 became the first woman to lead a global automaker and within weeks her tenure was overtaken by a recall for defective ignition switches on small cars now blamed for more than 100 deaths. Both cases resulted in deferred prosecutions by the U.S. Justice Department, in-house monitors of recall practices and fines totaling more than $2 billion.
The top priority for Volkswagen’s new CEO will be rebuilding the company’s reputation after the 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 on Tuesday in an initial tally of potential costs.
“We are aware that overcoming this crisis of trust will be a long-term challenge that will require a lot of determination and stamina,” said Wolfgang Porsche, the head of the family that controls 50.7 percent of VW’s voting shares.
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 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.
Known to carry a measuring stick to check the uniformity of parts, Winterkorn’s attention to detail came back to haunt him. Analysts questioned how a man who would berate staff over the shine on chrome parts could have let something go so awry.
“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.”