Scandal-hit Volkswagen readies to name new CEO

Scandal-hit Volkswagen readies to name new CEO
German car maker Volkswagen's headquarters is in Wolfsburg, central Germany.
PHOTO: AFP

WOLFSBURG, Germany - Shares in Volkswagen sped higher on Friday ahead of the appointment of its new chief executive as the embattled carmaker seeks to steer itself out of the wreckage of the scandal over rigged pollution equipment.

VW shares, which have bounced back from unprecedented losses at the start of the week, hit an intraday high of 117 euros (S$187) in the first few minutes of trading, an increase of 4.3 per cent on the day.

But by late morning, they had fallen back to show a more modest gain of 1.78 per cent, as it quickly became clear that the carmaker's woes were far from over.

India on Friday joined a growing list of countries that have launched investigations over the cheating scandal, while Australia said it 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.

Volkswagen was expected to name its new CEO later in the day to replace Martin Winterkorn who quit at the height of the biggest crisis engulfing the group.

Volkswagen's 20-member supervisory board was scheduled to meet at their 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.

If confirmed, Mueller would have the immediate task of tackling the investigations and the growing tangle of legal woes that erupted when the scam went public a week ago with the United States announcing a probe that could lead to fines worth more than US$18 billion (S$25.7 billion).

Regulators from the EPA and the California Air Resources Board accused Volkswagen of designing software to evade US limits on nitrogen oxide and other pollutants that engaged pollution controls only when cars are undergoing emissions tests.

The scale of VW's deception became clear when the company admitted that 11 million of its diesel cars are equipped with the devices.

The US Justice Department said late Thursday that it was taking the allegations against VW "very seriously" and was working closely with the Environmental Protection Agency (EPA) in its own inquiry.

"We take these allegations, and their potential implications for public health and air pollution in the United States, very seriously," a department spokesman said.

Porsche chief frontrunner 

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.

According to the business daily Handelsblatt, the supervisory board has settled on Mueller, an already well known name within the German automobile industry.

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

Mueller would replace VW chief executive Martin Winterkorn who resigned Wednesday, saying he was "stunned that misconduct on such a scale was possible in the Volkswagen group" and that he accepted responsibility as chief executive.

The 68-year-old said he was "not aware of any wrongdoing" on his part.

His resignation ended the haemorrhage of VW shares somewhat, but not before 25 billion euros ($28 billion) had been wiped off the company's market capitalisation when investors dumped Volkswagen shares on Monday and Tuesday, sending it into 35-per cent meltdown.

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.

Downgrade threat

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 Environmental Protection Agency.

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.

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.

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