VW Chairman Poetsch Engulfed in Diesel Crisis as Probe Widensby , , and
Former CFO named as third suspect in market-manipulation probe
VW insider was controversial choice for chairman position
Volkswagen AG Chairman Hans Dieter Poetsch has survived internal purges and scandals for more than a decade at the German carmaker. Now his position at the top of the manufacturer is coming under strain as he becomes directly enmeshed in the diesel-emissions scandal for the first time.
German prosecutors said they had enough evidence to name Poetsch as the third suspect in a probe into whether Volkswagen was too slow to inform the market about the cheating. The automaker stood by the executive, who was chief financial officer when the crisis unfolded, saying that management complied with German law and that Poetsch will continue to cooperate with the investigation, while the families controlling Volkswagen said they continue to back Poetsch.
Poetsch became chairman at the height of the crisis after then-Chief Executive Officer Martin Winterkorn and other key managers were forced out. His ascent sought to bring continuity to the automaker as its shares collapsed, U.S. sales plunged and potential fines ballooned. His implication in the market-manipulation investigation is likely to renew criticism from institutional investors who have questioned how he can fairly oversee the internal probe into the cheating on emissions tests when he was CFO at the time the scandal occurred.
“Of course he’s a little tarnished by being included in the investigation,” said Marc-Rene Tonn, a Hamburg-based analyst with Warburg Research. “While the families have rallied behind him, his position has been weakened. But it wouldn’t be expedient for Volkswagen to start discussing the next personnel change but await the outcome of the investigation.”
Poetsch, 65, was chosen to oversee the company in September 2015, before the cheating on emissions became public, and held onto the position even as the issue cost Winterkorn his job. One of the last survivors of an inner circle that included Winterkorn and former Chairman Ferdinand Piech, Poetsch was seen as a safe bet to guide the company through turbulent times given his skills as a behind-the-scenes conciliator.
Just two days before the annual shareholder gathering that confirmed Poetsch in the chairman post, prosecutors opened their initial market-manipulation probe. At the time, they named Winterkorn and VW brand chief Herbert Diess and made a point of saying Poetsch was not one of the executives under investigation.
Braunschweig prosecutors since then have interviewed more witnesses and analyzed additional information to conclude that the probe could be extended to Poetsch, Klaus Ziehe, a spokesman for the prosecutors, said on Monday.
The issue of what top executives knew and when they knew it is crucial for a series of German investor lawsuits that seek about 8 billion euros ($8.83 billion) in damages. The scandal has already cost the company 18.2 billion euros for recalls in Europe and damages in the U.S., where Volkswagen has agreed to buy back almost half a million cars as part of a broader civil settlement.
Poetsch took a beating from investors at the June shareholders gathering, who tried unsuccessfully to unseat him as head of the meeting. German supervisory boards have the mandate to hire and dismiss key executives and sign off on major strategic decisions. The panel is split equally between investors and labor representatives to assure a balance of power. Poetsch was defended at the meeting by members of the controlling family and worker representatives.
Poetsch joined Volkswagen as chief financial officer in 2003 after stints as CEO of car-parts supplier Duerr AG and chief controller at BMW AG. VW insiders say he has a calm demeanor that has helped him through three management reshuffles in a dozen years. He had preferred staying in the background, leaving center stage to Piech and Winterkorn, both famous for obsessing over engineering details and notorious for gruff responses to perceived shortfalls.
By contrast, Poetsch typically responds to confrontation with a flood of financial details rather than lose his cool, say people who have attended board-level meetings with him. The former CFO survived Piech’s expulsion of the CEO who hired him -- Bernd Pischetsrieder -- in 2006. And he remained untainted by a scandal a decade ago involving Volkswagen worker representatives partying on the company’s tab.
He gained the trust of Piech and the rest of the controlling Porsche-Piech clan by negotiating a successful conclusion to a seven-year takeover saga that saw VW gain control of Porsche’s carmaking business in 2012. Poetsch’s complex structure for the deal cut what could have been a 1 billion-euro ($1.11 billion) tax bill down to slightly more than 100 million euros.
“He’s been a well-respected figure over the years, but as was said at the time of his appointment as chairman, maybe not the right man for the job right now,” said Stuart Pearson, a London-based analyst with Exane BNP Paribas.