Scandal-hit Volkswagen readies to name new CEO

Raphaelle Logerot with Simon Morgan in Frankfurt
1 / 5

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 test

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 test (AFP Photo/Odd Andersen)

Wolfsburg (Germany) (AFP) - Embattled carmaker Volkswagen will Friday name a new chief executive to steer it out of the wreckage of a widening scandal over pollution test rigging, as Washington said it would test all diesel cars for devices that fool emissions tests.

Volkswagen's fortunes have been turned upside down with the stunning revelations by US environmental prosecutors a week ago that the German carmaker had fitted some of its diesel cars with software capable of tricking emission tests -- a scam that could lead to fines worth more than $18 billion.

The scale of VW's deception became clear when the company admitted that 11 million of its diesel cars are equipped with so-called defeat devices that covertly turn off pollution controls when the car is being driven.

Authorities from India to Norway announced new probes, while the US environmental regulator said it would test all diesel car models.

"Today we are putting vehicle manufacturers on notice that our testing is going to include additional evaluation and tests designed to look for potential defeat devices," Christopher Grundler, Director of EPA Office of Transportation & Air Quality, said.

"We're not going to tell them what these tests are, they don't need to know."

VW shares closed 4.32 percent down Friday at 107.30 euros, after a week of haemorrhage which saw 34 percent of its value wiped off.

The company's CEO Martin Winterkorn was forced to resign in the eye of the storm, and Volkswagen's 20-member supervisory board was meeting Friday at headquarters in Wolfsburg to designate the new leader.

But according to reports, they have already picked the current chief of VW's luxury sportscar division, Porsche, 62-year-old Matthias Mueller.

- Porsche chief frontrunner -

Born in Chemnitz in the former communist East Germany, Mueller was appointed chief executive at Porsche in 2010 and enjoys the backing of the Volkswagen group's family shareholders.

He had already been tipped to take over during a bitter leadership struggle earlier this year between Winterkorn and his one-time mentor and former supervisory board chief Ferdinand Piech.

It was Winterkorn who eventually won that battle, only to fall this week over the scandal.

Winterkorn, who once famously said he knows "every screw in our cars", resigned Wednesday, saying he was "stunned that misconduct on such a scale was possible in the Volkswagen group".

The 68-year-old said he accepted responsibility as chief executive but was "not aware of any wrongdoing".

With the German car industry reeling, top-of-the-range automaker BMW suffered collateral damage on Thursday when its shares skidded after the weekly Auto Bild reported that emissions from one of its diesel models were 11 times higher than European Union norms.

While there was no indication that BMW had cheated in pollution tests -- something the company strongly denied having done -- the report nevertheless shook investors.

Daimler too issued a firm denial Friday that its vehicles were rigged, after an environmental group claimed that they too, were affected.

- Legal threats -

If there is any small comfort that Volkswagen could draw, it would be that its two main joint ventures in China confirmed that their products were not involved in the rigging scandal.

China -- the world's biggest auto market -- is crucial for VW, which delivered 3.67 million cars in the country last year, beating US rival General Motors which sold 3.54 million, figures from the companies showed.

Nevertheless, VW would still have to tackle a growing list of legal tangles.

Norway's economic crimes unit said Friday a fraud probe had been opened into the pollution cheating scandal, while India said it was doing likewise.

Australia too was seeking urgent clarification from the beleaguered company on whether cars in the country had also been fitted with the device that fools pollution tests.

France announced sample checks on diesel cars as soon as next week, after the European Union urged its 28 member states to investigate whether vehicles in their countries comply with European pollution rules.

French Environment Minister Segolene Royal told Europe 1 radio that the random checks of 100 diesel cars aimed to "ensure the absence of fraud".

In Britain, Transport Secretary Patrick McLoughlin said new checks would be carried out across the automobile industry to ensure that the "unacceptable actions" at Volkswagen were not repeated. He also backed calls for a Europe-wide probe.

The US Justice Department said late Thursday it was taking the allegations against VW "very seriously" and was working closely with the EPA in its own 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.

VW has set aside 6.5 billion euros in provisions for the third quarter to cover the potential costs of the disclosures.

Standard & Poor's and Fitch have warned they may cut Volkswagen's credit rating over the pollution cheating scandal, which could increase the company's financing costs.