Volkswagen seeks new chief as pollution scandal spreads
FRANKFURT, Germany – Auto giant Volkswagen searched Thursday, September 24, for a new chief to steer it out of a global pollution cheating storm, as suspicions over diesel car emissions spread for the first time to fellow German manufacturer BMW.
Shares in top-of-the-range automaker BMW skidded nearly 10% at one point after the weekly Auto Bild reported that emissions from one of its diesel models were 11 times higher than European Union norms.
But BMW said it had not cheated in pollution tests, as VW has admitted to doing.
"The BMW group does not manipulate or rig any emissions tests. We observe the legal requirements in each country and adhere to all local testing requirements," it said in a statement.
"We are not familiar with the test mentioned by Auto Bild concerning the emissions of a BMW X3 during a road test. No specific details of the test have yet been provided and therefore we cannot explain these results," it said.
The test on BMW's X3 xDrive was carried out by the International Council on Clean Transportation, which had been at the origin of revelations of emissions cheating by Volkswagen.
After initially plunging 9.7% on the report, BMW shares ended the day 5.15% lower.
Germany's powerful car industry has been reeling over the revelations that Volkswagen fitted up to 11 million of its diesel cars with devices capable of fooling emissions tests.
The scandal, which emerged last Friday when US officials publicly accused the company of cheating and launched a probe, has now gone global with French and South Korean authorities also announcing investigations.
The biggest bank in the Nordic region, Nordea, said it was barring its traders from buying Volkswagen shares and bonds for 6 months over the emissions scandal.
"We are sending a clear message that this is unacceptable," Sasja Beslik, head of responsible investments at Stockholm-based Nordea, told Agence France-Presse.
"We believe this action, or lack of action, from the management is outrageous. It's poor judgment in terms of business, but it's also very costly from a financial point of view," he said.
Investors had dumped Volkswagen shares on Monday and Tuesday, sending it into 35% meltdown and wiping 25 billion euros ($28 billion) off the company's market.
On Wednesday, VW chief executive Martin Winterkorn resigned, saying he was "stunned that misconduct on such a scale was possible in the Volkswagen group" and that he accepted responsibility as chief executive for the manipulation of diesel emission tests.
The 68-year-old said he was "not aware of any wrongdoing" on his part.
"Volkswagen needs a fresh start – also in terms of personnel. I am clearing the way for this fresh start with my resignation."
The resignation appeared initially to turn the tide for Volkswagen on the market, with its shares shooting up 7.9% to hit an intraday high of 120.30 euros in the morning in Frankfurt. They ended the day only very modestly higher by 0.58%.
As questions grow over how Volkswagen may have carried out such a large-scale scam, the world's biggest auto-manufacturer by sales is seeking a chief executive to steer it through the difficult terrain ahead.
Rumors of potential successors circulated widely in German media but it seems likely the new boss will come from one of the sprawling family of brands that make up the group, from SEAT in Spain, Skoda in the Czech Republic, Audi and Porsche in Germany, Lamborghini in Italy and Bentley in Britain.
According to the business daily Handelsblatt, the supervisory board has settled on the current chief of VW's Porsche luxury sports car division, Matthias Mueller.
Born in Chemnitz in former East Germany, Mueller was appointed CEO at Porsche in 2010 and enjoys the backing of the group's family shareholders.
His nomination would be made public early on Friday afternoon, September 25, the newspaper said.
Whoever the new boss turns out to be will have the unenviable task of taking the reins during its deepest crisis.
Beyond repairing the damage to its reputation, the new boss will have to tackle the host of legal challenges facing the company.
VW has set aside 6.5 billion euros in provisions for the third quarter to cover the potential costs of the revelations.
According to the US authorities, VW has admitted that it equipped about 482,000 cars in the United States with sophisticated software that covertly turns off pollution controls when the car is being driven.
It turns them on only when it detects that the vehicle is undergoing an emissions test.
With the so-called "defeat device" deactivated, the car can spew pollutant gases into the air, including nitrogen oxide, in amounts as much as 40 times higher than emissions standards, said the US Environmental Protection Agency (EPA).
The EPA is conducting an investigation that could lead to fines amounting to a maximum of more than $18 billion.
The US Department of Justice has also launched a criminal inquiry.
Private law firms are also lining up to take on the German company, with a class action suit already filed by a Seattle law firm.
Volkswagen SEAT unit fitted over 500,000 cars it manufactured with the pollution control defeat device, Spanish newspaper El Pais reported Thursday.
Standard & Poor's warned it may cut Volkswagen's credit rating over the pollution cheating scandal, as fellow rating agency Fitch did on Wednesday, September 23.– Rappler.com
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