Porsche committed to making its first all-electric vehicle, taking on Tesla Motors Inc. with a model that’s set to accelerate faster than the German company’s 911 sports car and recharge in 15 minutes.
Porsche green-lighted a 1 billion-euro ($1.09 billion) project to produce the battery-powered sports car, which will be manufactured near division headquarters in Stuttgart and create 1,000 jobs, the Volkswagen AG unit said Friday in a statement. The model, based on the low-slung Mission E concept unveiled in September at the Frankfurt auto show, will enter showrooms at the end of the decade, it said.
“With Mission E, we are making a clear statement about the future of the brand,” Chairman Wolfgang Porsche said in the statement. “Even in a greatly changing motoring world, Porsche will maintain its front-row position with this fascinating sports car.”
The step is part of efforts by Volkswagen, Europe’s largest automaker, to move beyond a scandal over rigged car-emissions tests. Chief Executive Officer Matthias Mueller, who ran Porsche until late September, has vowed to accelerate and widen development of electric cars amid a reorganization that delegates more decision-making to the Volkswagen group’s brands and regional units.
Porsche caused a stir at the Frankfurt show with the four- seat Mission E electric sports-car concept, whose acceleration to 100 kilometers (62 miles) per hour in less than 3.5 seconds beats the 911’s 4.2 seconds to reach that speed. The new electric vehicle will complement a lineup comprising the 911, the smaller Cayman sports car, the Boxster roadster, the four- door Panamera coupe and the Cayenne and Macan sport utility vehicles. Porsche’s high-performance 918 Spyder has been sold out as production was limited to safeguard exclusivity.
The division is set to sell more than 200,000 vehicles for the first time this year, driven by demand for the $52,600 compact Macan. Palo Alto, California-based Tesla, maker of the battery-powered Model S sedan and Model X SUV, is targeting 50,000 to 55,000 deliveries in 2015.
The 600-horsepower Mission E will be designed to drive more than 500 kilometers before needing a recharge, Porsche said. The battery can reach 80 percent of capacity in about 15 minutes, about half the time needed by Tesla’s Model S to recharge for a 270-kilometer driving range.
Volkswagen is apologizing. The company’s American arm rolled out its first ad campaign today addressing the emissions scandals that have rocked the company over the past couple of months. The understated full-page ad, published in over 30 newspapers across the US today, says in large type: “We’re working to make things right.”
It continues, “Over the past several weeks, we’ve apologized to you, our loyal customers, about the 2.0L VW emissions issue. As we work tirelessly to develop a remedy, we ask for your continued patience.” Volkswagen has yet to develop a solution for fixing the emissions on vehicles that utilized a defeat device to fool regulators into recording low emissions values on certain diesel vehicles.
“We sincerely hope you see this as a first step toward restoring your invaluable trust.”
Beyond serving as a much-needed apology to its customers — who woke up after the scandal to find the resale value on their cars had depreciated — the ad also promotes the company’s “goodwill package” announced this past week. The German carmaker is offering $500 in the form of a Visa gift card to owners of models effected by the scandal. It’s also tossing in a $500 gift card towards the purchase of a new Volkswagen, and three years of no-cost roadside assistance.
If that doesn’t quite seem like enough to make up for Volkswagen’s major failures that led up to the scandal, the company says in the public letter that “we sincerely hope you see this as a first step toward restoring your invaluable trust.”
Volkswagen has hired Apple software guru and former Mercedes-Benz executive Johann Jungwirth to lead its new “digitization strategy department,” marking the latest twist in the global battle for talent as the auto industry pursues self-driving vehicles.
Jungwirth will report directly to new Volkswagen Group CEO Matthias Mueller, signaling the significance of his role for the German automaker.
Volkswagen provided little detail about what “digitization strategy” entails.
At Apple, Jungwirth, 42, held the murky title of director of Mac systems engineering, with responsibility for overseeing what VW described as the “special projects group.”
His hiring at Apple — done in relative secrecy at the time — was viewed as key to the technology giant’s ambitions to build its own self-driving vehicle. But he only spent about a year there.
The Romanian native’s move to Apple came after a five-year tenure as president and CEO of Mercedes-Benz Research & Development North America in Silicon Valley, where his responsibilities included oversight of autonomous driving technologies and electric vehicle advancements.
He was also vice president of infotainment and telematics — the division that developed touch-screen systems for Mercedes vehicles.
Volkswagen CEO Mueller told reporters last month that electric vehicles will play a significant role as the company overhauls its product strategy in the wake of an emissions scandal.
Volkswagen AG will offer credit cards worth $1,000, of which half is to be spent at VW and Audi dealerships, to U.S. owners of certain diesel models that do not comply with government emissions standards, VW’s U.S. subsidiary said on Monday.
The automaker said eligible U.S. owners of nearly 500,000 VW and Audi models equipped with 2.0 liter TDI diesel engines can apply to receive a $500 prepaid Visa card and a $500 dealership card, as well as three years of free roadside assistance services.
The program could cost VW nearly $500 million, half of which could flow directly to dealers.
The German automaker has been embroiled in a scandal that erupted in September when it admitted it had rigged U.S. tests for nitrogen oxide emissions. The crisis deepened last week when it said it had also understated the carbon dioxide emissions and fuel consumption of vehicles in Europe.
VW also said on Monday it continues to discuss potential remedies with U.S. and California emissions regulators, including the possibility that some of the affected cars could be bought back from customers.
In Washington, Democratic Senators Richard Blumenthal and Edward Markey on Monday decried VW’s consumer program as “insultingly inadequate” and “a fig leaf attempting to hide the true depths of Volkswagen’s deception.”
The senators said VW “should offer every owner a buy-back option” and “should state clearly and unequivocally that every owner has the right to sue.”
VW has said about 482,000 cars sold in the United States since 2009 with four-cylinder diesel engines had software installed that allowed the engines to pass government tests for smog-forming nitrogen oxide emissions, but pollute at levels far above government limits in normal operation.
On Monday, the automaker posted details of its “goodwill package” at http://www.vwdieselinfo.com. Audi plans to post details of a similar program on Friday.
VW said the customer offer did not cover models equipped with the 3.0 V6 TDI diesel engine, including the Touareg. The company last week told U.S. and Canadian dealers to stop selling certain of those models from 2014-2016 after the U.S. Environmental Protection Agency said that VW group brands had installed illegal devices on some 3.0 V6 diesel models.
To qualify for the credit card offer, VW diesel owners must go to the company website, enter a vehicle identification number and provide mileage and contact information. VW will send the cards by mail. To activate the cards, owners then must take the vehicle to the dealer for verification.
VW said on Monday that customers “don’t have to sign anything” and will not be required to relinquish any legal rights.
Written by Joseph White and Paul Lienert of Reuters
(Bloomberg) — Volkswagen AG’s designated Chairman Hans Dieter Poetsch warned managers that the diesel-emissions scandal could pose “an existence-threatening crisis for the company,” as it pleaded for public trust with full-page ads in national newspapers.
The German carmaker faces a Wednesday deadline to present a plan to fix some 2.8 million vehicles in its home market. Poetsch told managers last week he was certain the Wolfsburg, Germany-based carmaker will overcome the crisis with enough effort, according to Welt am Sonntag newspaper.
Volkswagen and German industry have been rocked by charges, first made by U.S. regulators on Sept. 18, that the carmaker had used software to hoodwink regulators about the true emissions of its diesel cars for years. As owners of 11 million affected cars across the globe, regulators and investors await answers, the crisis has wiped out almost 30 billion euros ($34 billion) of the company’s value.
As Volkswagen’s new chief executive officer, Matthias Mueller, vows to repair the damage, the carmaker undertook a media campaign that included a full-page mea culpa advertisement published in major German newspapers to mark the 25th anniversary of the country’s reunification.
Instead of lauding a quarter century of German unity, the company used fine print on a broad white field to say it would dispense with celebratory expressions, instead assuring the public that it will resolve the crisis.
“We just want to say one thing: We will do everything to win back your trust,” the carmaker said in the ad Sunday.
After mostly remaining silent on the cheating scandal, Chancellor Angela Merkel on Sunday called the disclosure by Germany’s largest carmaker “a dramatic event” and said Volkswagen must clarify the affair swiftly. She ruled out a longer-term impact on the country’s industry.
“I believe that the reputation of German industry, the trust in Germany as a business location, hasn’t been so shaken that we won’t continue to be seen as a good business location,” Merkel told Deutschlandfunk radio in an interview.
An internal investigation has already yielded several engineers who admitted to installing the fraudulent software in 2008 for EA 189 diesel-motor models, Bild am Sonntag newspaper reported Sunday. The decision for the regulatory work-around came as project engineers determined there was no way to meet both emissions standards and cost controls, a jam that threatened to bring the marquee project to a halt, Bild said.
The result was a so-called defeat device that disengaged emissions controls when an auto wasn’t being tested, breaching emissions rules and prompting a raft of government investigations and lawsuits since the U.S. Environmental Protection Agency cited the violations last month.
Volkswagen has also found more executives are involved in the scandal than previously acknowledged, a group bigger than just a few developers, Frankfurter Allgemeine Sonntagszeitung reported, citing officials close to the supervisory board.
Volkswagen declined to comment on the German newspaper reports, company spokesman Eric Felber said by phone.
Martin Winterkorn quit as CEO on Sept. 23. Audi development chief Ulrich Hackenberg, a Winterkorn confidante who was responsible for VW brand development in 2007 to 2013, and Wolfgang Hatz, who ran the group’s powertrain development from 2007 and 2011, are among others who will leave, according to people familiar with the matter.
The manipulated software may have been put into parts supplied by Hanover, Germany-based Continental AG for 1.6-liter engines, Bild am Sonntag reported. Upgrading models with Continental parts would entail replacement parts, not just a software upgrade, Bild said.
Another engine-parts supplier, Robert Bosch GmbH, warned VW in 2007 that its planned use of the software was illegal, Bild reported on Sept. 27.
“We have no indication of any misuse of our technology,” Continental spokesman Felix Gress said by phone, adding that it wasn’t outfitted to gauge emissions.
In contrast with Merkel, European Parliament President Martin Schulz, a German Social Democrat, said the scandal is a “grave blow for the German economy as a whole.”
“It’s hard to believe the level of negligence and possibly even criminal activity was present here,” Schulz told the Funke group of German newspapers in an joint interview. “Still, I think Volkswagen is a strong company that has every chance to overcome the crisis.”
Wolfsburg, Germany, is the town that Volkswagen built — literally put on the map in 1938 by the Nazis in pursuit of their dream of a “People’s Car.”
The town rode the company’s postwar boom to financial wealth and today the two are inseparable. There’s a top league soccer club that wears the VW logo and plays in the Volkswagen arena; Volkswagen’s headquarters and manufacturing plant take up much of its real estate. There’s a Volkswagen bank, a Volkswagen real estate dealer, and even a Volkswagen sausage factory.
So when it was revealed this month that the automaker had cheated on U.S. emissions tests, causing its shares to plummet, the mood here darkened.
“People are feeling a little down, like heads will roll, and not up high but at the lower levels,” said 65-year-old Mark Graff, waiting outside the VW gates to pick up his daughter after her shift on the assembly line.
Graff, whose son also works full-time at the plant, said there was worry that if sales slumped, shifts would be cut.
“First will be the part-time workers, and there are a lot of them,” he said.
Nobody knows quite what to expect, but nobody thinks the coming months are going to be easy as the world’s top-selling car manufacturer struggles to deal with myriad legal and technical problems while trying to restore its image. The city is already freezing spending and hiring.
When established in 1938 to build the People’s Car on Adolf Hitler’s orders, Wolfsburg carried an unwieldy name that translates as “Town of the ‘Strength Through Joy’ Car Near Fallersleben.”
With the use of foreign forced laborers, prisoners of war and concentration camp prisoners, the Volkswagen factory was quickly built. Instead of the People’s Car — what became the VW Beetle — it produced military jeep-type vehicles, V1 rockets and other military equipment.
Renamed Wolfsburg in 1945 after a nearby castle, today the town of 120,000 people has 120,000 jobs, drawing commuters from the surrounding area. Some 70,000 work for Volkswagen, while many others depend upon the company. Wolfsburg is as dependent on the auto sector as Detroit was in its heyday.
Sumon Ahmed, a 24-year-old who was working at the Volkswagen plant for the summer, said he’d heard people saying they might not get a bonus — a hefty 5,900 euros ($6,610) per employee covered by the union contract last year.
“At least there will be a short-term effect with a decrease in profits, but in the long term we just don’t know,” he said, still wearing his blue VW shirt as he started his afternoon trek home after his shift on the line helping build the Golf and Polo models this week.
Most others coming off work refused to talk about the situation, circling the wagons — or Volkswagens, as it were — in support of their employer.
“Go to Mercedes; they also have dirty secrets,” barked one middle-aged man in a VW shirt.
It’s an understandable attitude, considering that Wolfsburg — off the Berlin-Hannover highway in northern Germany — is the country’s financially strongest city thanks primarily to Volkswagen. Its economic output per person is the highest in the country. Ingolstadt, home to VW subsidiary Audi, is in fourth place.
Volkswagen AG could face fines in the U.S. of as much as $18 billion for 482,000 cars identified with the so-called “defeat device” that allowed them to beat the testers. Other countries, such as South Korea, have also ordered investigations into emission levels of VW cars and some law firms in North America have filed class-action suits.
It remains unclear how widespread the use of the device was, but Volkswagen has said 11 million of its vehicles worldwide contain the same software.
Volkswagen has set aside an initial 6.5 billion euros ($7.3 billion) to cover the fallout and “win back the trust” of customers, though it didn’t mention possible fines.
On a country-wide scale, ING economist Carsten Brzeski said at this juncture it is unclear what impact the Volkswagen scandal will have on the German economy, but “needless to say, owning 12 brands in seven European countries and having a global market share of around 13 percent of all passenger cars, there will be an impact.”
“In Germany, Volkswagen employs more than 270,000 people,” he said. “Adding a proxy of the possible suppliers to the equation, Volkswagen accounts for roughly 1.5 percent of German employment and even more when it comes to the growth impact.”
So far, one Volkswagen factory, in the city of Salzgitter, has dropped one shift a week, and the VW financial services division imposed a temporary freeze on hiring.
The trickle-down hasn’t taken long to reach Wolfsburg.
Mayor Klaus Mohrs announced this week that there would be an immediate spending freeze, and a hiring freeze for town jobs. Projects underway are being allowed to continue, but no new ones are to be undertaken.
“Even though our town is debt-free and we have been able to make contingency provisions, we now expect to receive far less business tax revenue,” he said in a statement. “it’s still too early to talk about concrete numbers, but it it’s clear that we’re already this year going to have to count on far less.”
Ingolstadt has followed suit, also announcing spending cuts.
Michael Wilkens, head of the Wolfsburg Chamber of Commerce, said it makes good business sense to prepare for leaner times, but noted that the relationship between the town and Volkswagen is one that has been cultivated over decades and that the trust in Volkswagen was deep.
“What is happening now is certainly a difficult phase, but the hope is that VW will come out of it stronger,” he said.
At the Carl Hahn high school for business and administration, whose front entrance shares an awning with a pedestrian tunnel that takes VW employees under a road and train tracks to work, students who had been considering the company as a future employer were holding on to that hope.
“Once I’m done then I can imagine working for VW, but that doesn’t look so good now,” said 17-year-old student Tobias Batzdorfer, who has two years left in school.
“I don’t think VW’s going to go broke though — it’s so huge, it’s part of the whole region. There’s clearly going to be a phase where they’re losing money but after a couple of years they’ll regain their image and be back on a good footing.”
Tesla Motors Inc., the smallest publicly held U.S. automaker, hands over the first of its Model X sport utility vehicles Tuesday evening amid growing scrutiny of Volkswagen AG, one of the world’s biggest car companies, after the admission that it cheated on emissions tests.
Hybrid and electric cars have struggled to gain traction with mainstream consumers amid lower gasoline prices. But Tesla — which promotes its Model S with the line “Zero Emissions. Zero Compromises.” — may see a bounce from the growing “dieselgate” scandal that has engulfed VW and cast a shadow on the German auto industry.
The all-electric Model X, the second car in Tesla’s lineup after the Model S sedan, is crucial to the Palo Alto, California-based company’s efforts to both scale its manufacturing and broaden its appeal. After years of delays, the question now is if Tesla, run by Chief Executive Officer Elon Musk, can ramp up production of the X fast enough to meet its lowered sales target for 2015. Much of Tesla’s sales are back- weighted to the fourth quarter, raising the stakes for a smooth — and steep — production increase.
“We’ll see if Tesla can supply enough Model Xs fast enough to satisfy the waiting list,” Jack Nerad, executive market analyst at KBB.com, said in an e-mail.
The Model X will compete for customers with premium luxury SUVs that are largely made by German automakers, including the Audi Q7, the BMW X5 and the Porsche Cayenne. While it is only certain diesel models made by Volkswagen that are under investigation in the emissions-cheating scandal, Peter Altmaier, chief of staff to German Chancellor Angela Merkel, challenged the nation’s carmakers to prove that their country remains a leader in the auto industry by beating Tesla in the nascent electric-car market.
“I know Elon Musk, I met him last year, he’s an impressive guy and his Tesla car is an impressive car,” Altmaier said in an interview with Bloomberg Television in Berlin. “I would be very pleased if the German carmakers would be able to produce an e- car that’s better and cheaper than Elon Musk’s car.”
Germany has been a tough market for Tesla to crack, in part because the big German automakers — BMW, Mercedes-Benz and VW – – compete mightily with each other for market share.
Though VW is the focus of investigations, regulators in Europe and the U.S. are increasingly looking at the emissions of other automakers’ vehicles, with focus on discrepancies between lab tests and on-road results.
“The question on a lot of minds is: Are any other automakers cheating on emissions, or ‘optimizing’ for the best emissions results?” said Brian A. Johnson, an analyst with Barclays, in an interview Monday. “Do European consumers go on strike against diesel?”
Musk unveiled the Model X in February 2012 at a splashy Los Angeles event featuring California Governor Jerry Brown, with production planned for 2013. Three and a half years later, the first Xs — a limited-edition Founders Series that typically goes to board members and close friends of the company — will be handed over Sept. 29 at a high-profile evening event in Fremont, California, where Tesla has its factory.
Tesla has yet to release detailed specs on the car, but some information and images have been widely circulated online by customers who put down $40,000 deposits to reserve the Signature Series, the limited edition vehicle that comes after the Founders version.
The all-wheel-drive X seats either six or seven passengers. In recent days, images of a six-seat Model X — with two second- row seats instead of three — have appeared in the online configurator. Interior volume is a big issue for potential Model X customers, who want to know if they can fit bikes, skis and other recreational equipment easily into the vehicle. The third- row seats fold flat, according to Tesla’s website.
The car has what it calls “falcon wing” doors that open vertically and a 90 kilowatt-hour battery that is projected to have a range of roughly 250 miles (402 kilometers) per charge. Musk tweeted that with the same options, the Model X will cost $5,000 more than the S due to its greater size. The S starts at $75,000. Tesla designed its first sport utility vehicle in part to appeal to female drivers, as women buy more than half of the small SUVs in the U.S., according to J.D. Power & Associates.
Tesla aims to deliver 50,000 to 55,000 vehicles this year, compared with a previous target of 55,000 — partly owing to production snags with the Model X’s complex middle-row seats. Tesla delivered 21,577 vehicles in the first half of the year, which means it must deliver 28,423 vehicles in the second half to meet the lower end of its guidance.
“The VW scandal highlights that the auto industry is under a lot of pressure to comply with tightening emissions standards and fuel-economy laws, and with an internal combustion engine, it’s difficult to conform without realizing a corresponding trade-off in vehicle performance,” said Andrea James, an analyst with Dougherty & Co. “Electric vehicles, and hence Tesla, fall outside of this conundrum.”
Just a few days before the U.S. Environmental Protection Agency and the California Air Resources Board revealed that VW had admitted to deceiving the emissions tests, VW announced at the Frankfurt auto show that it will roll out 20 new electric and plug-in hybrid models by 2020, including the Porsche Mission E and the Audi e-tron quattro.
“Given the investigation timeline, it is highly likely that VW knew about the coming controversy when it made the EV and plug-in hybrid announcement,” said Bloomberg New Energy Finance in a research note to clients Sept. 22. “The scandal could push VW more strongly towards electrification as it looks to improve its public image and meet increasingly stringent fuel economy standards.”
Volkswagen’s push to secure tax breaks that kick-started a market for its new diesel cars could now help U.S. investigators build a case against the automaker for deceiving the government about their emissions, lawyers said.
VW was among several automakers that lobbied the administration of George W. Bush to secure around $50 million in tax breaks under an incentive program that included the first wave of VW Jetta TDI drivers in the United States.
Around 39,500 customers bought 2009 year VW vehicles eligible for the $1,300 rebate, according to the research firm Autodata Corp.
VW’s campaign to get those rebates could open a claim for civil penalties or criminal charges against the German automaker or its executives, according to lawyers who are outside both the developing U.S. investigation and the company’s response but familiar with complex public prosecutions.
VW spokeswoman Jeannine Ginivan said the company had no immediate comment.
VW said last week that it equipped 11 million of its vehicles with software that had the effect of causing the diesel cars to run cleaner during testing by regulators than they did in actual driving.
U.S. prosecutors would need to show that VW executives intentionally made fraudulent claims about their cars’ emissions as part of the effort to win the tax break, the lawyers said.
Prosecutors could bring a criminal tax fraud case against VW and charge executives if authorities are able to show individuals intended to trick U.S. authorities, said Scott Michel of law firm Caplin & Drysdale.
U.S authorities also could bring a claim under the False Claims Act — a law that prohibits lying to authorities to obtain a government benefit, said Aaron Katz, an attorney at Ropes & Gray.
In such a case, authorities could seek to have VW pay back as much as three times the money received by its customers in tax incentives, plus $5,000 for each buyer, he said.
A maximum penalty for False Claims Act violations would be unlikely in a negotiated settlement, Katz said. On the other hand, those penalties represent only one portion of the charges prosecutors could pursue against VW for allegedly deceiving the public and regulators, Katz said.
VW, which has set aside about 6.5 billion euros ($7.3 billion) in the third quarter to cover costs related to the scandal, is not without potential defenses, other lawyers say. Environmental law experts say that so-called defeat devices – software used to override emissions controls – can sometimes be installed for legitimate purposes.
Automakers sometimes install such devices to allow vehicles to be tested under differing standards required by overseas regulators, said Bruce Pasfield, a former environmental prosecutor, now at the law firm Alston & Bird.
The U.S. Department of Justice has said it is investigating the emissions-test rigging that VW has admitted to environmental regulators but has declined to comment further.
The U.S. Environmental Protection Agency, which has barred VW from selling new diesel models in the United States until a fix has been approved, has said it could impose penalties on the company of up to $18 billion. In a note issued on Monday, Bernstein Research analyst Max Warburton said the EPA was likely to impose a fine of $7 billion in an “absolute worst case.”
The DOJ has said the two agencies are working together on the investigation.
VW said it had installed the rigging software starting in its 2009 diesel models, which were the cars that qualified for the new U.S. tax break. It remains unclear who approved the emissions cheating at VW, or when senior executives became aware, all key questions for any legal case.
The Energy Policy Act of 2005, signed by Bush, expanded a green vehicle tax break to include so-called “lean burn” vehicles like certain diesels for the first time.
The concession represented the culmination of a years-long effort to rehabilitate the reputation of diesel-powered cars. Although diesels represent about half of the European market, Americans had come to associate them with smog and clunky acceleration from a failed rollout of such cars in the 1970s and 1980s, according to records and people involved.
As part of its effort to win the tax subsidy, VW took some of its new “clean diesel” vehicles to Capitol Hill in 2005 to offer lawmakers test rides.
The pitch by VW and other advocates was that diesel technology had evolved to the point that cars could meet tough U.S. emissions standards and contribute to energy savings.
By 2005 the diesel lobby had won over Bush, who said then that the new technology would allow consumers to travel farther on each gallon of fuel, “without the smoke and pollution of past diesel engines.”
Four years later, VW had two new models – the Jetta TDI and the Jetta SportWagen — that the Internal Revenue Service certified were eligible for the tax credit.
Congressman Joe Barton, a Texas Republican who played a major role in getting the Energy Policy Act approved in 2005, told Reuters that VW should face “severe economic consequences” if it was found to have deliberately misled authorities.
“We need to look at the tax credits,” he told Reuters.
Daimler AG’s (DAIGn.DE) Mercedes was the only other carmaker to receive the tax credit. There is no evidence of emissions cheating beyond VW.
The Diesel Technology Forum, an advocacy group that counts VW as a member, said the VW case does not discredit the potential for diesel as a fuel-saving technology.
“The circumstances involving a single manufacturer do not define an entire technology, or an industry,” the group said in a statement.
Written by Ayesha Rascoe and Joel Schectman of Reuters
Volkswagen AG is set to appoint Porsche brand chief Matthias Mueller as its new CEO and announce the departure of top executives in a sweeping overhaul to begin repairing the carmaker’s image tarnished by rigged emissions tests.
The 20-person supervisory board began its meeting Friday morning to vote on naming Mueller, a company veteran for four decades who enjoys the support of the family that controls VW as well as the automaker’s influential labor leaders, said people familiar with matter, who asked not to be identified because the discussions are private. A VW spokesman declined to comment.
The 62-year-old Porsche chief would take charge as Volkswagen seeks to regain the trust of consumers and regulators after admitting to rigging engines to circumvent pollution controls. The crisis wiped about 20 billion euros ($22.4 billion) off VW’s market value this week, forcing Chief Executive Officer Martin Winterkorn to step down on Wednesday as the scandal widened and opened the door for the exit of other top managers.
Audi development chief Ulrich Hackenberg and Porsche development head Wolfgang Hatz are among those who will leave, two people said. Hackenberg, a Winterkorn confidante, was previously responsible for VW brand development and Hatz ran the nameplate’s motor development.
Mueller was already touted as a potential CEO successor when former Chairman Ferdinand Piech failed in a bid to oust Winterkorn in April. He’s run the maker of the 911 sports car since October 2010. Like his predecessor, Mueller is a long- serving Volkswagen employee, joining the Audi division as a toolmaking apprentice in the early 1970s.
To repair VW’s image, Mueller will have to move quickly to get into the public’s eye — a task better suited for his cool, cosmopolitan demeanor than that of the stiff and autocratic Winterkorn.
“For the next 12 months or so, he’ll be a problem-solver who’ll have to credibly drive this process internally and represent it publicly,” said Juergen Pieper, a Frankfurt-based analyst at Bankhaus Metzler.
While the current challenge is significant, Mueller has experience dealing with critical audiences. As Porsche boss, he attended classic-car events to connect with purists and justify expanding into mainstream segments with models like the Macan compact SUV. Under his watch, profit rose 62 percent over four years, and deliveries are on track in 2015 to surpass 200,000 vehicles for the first time.
To succeed he’ll also have to dismantle “fortress Wolfsburg,” Pieper said, referring to the automaker’s centralized oversight, which funnels decisions through its headquarters.
“The challenge will be how to break up a bureaucratic culture, so that people can speak up when there’s a problem, even if it means they won’t meet a deadline and they won’t make market share,” said Lynn Wooten, associate dean at the University of Michigan’s Ross School of Business. “How do you rebuild that reputation now and change the culture at the same time? That’s going to be the two major challenges.”
VW shares clawed back some of their losses from earlier in the week, gaining as much as 4.3 percent to 117 euros. They were up 1.2 percent as of 12:34 p.m. in Frankfurt. The stock plunged 35 percent over Monday and Tuesday.
The entire auto industry and the methods used for testing vehicles are coming under scrutiny following revelations that VW’s “clean diesel” cars have software intended to defeat emissions tests. The European Union urged all 28 members Thursday to start their own investigations, with Germany, Italy, France and the U.K. among countries in the region to already do so. Japan, India and South Korea have also announced probes into the matter.
The supervisory board will also decide Friday whether to hire U.S. law firm Jones Day to help with the investigation, said a person familiar with the matter, who asked not to be identified as the decision is still pending. VW has asked local prosecutors in Germany to start a criminal probe as well.
As part of the reorganization, Winfried Vahland will likely take over for the VW brand’s U.S. chief, Michael Horn, two people said. Vahland currently runs the Skoda division and prior to that was responsible for the automaker’s operations in China. Horn at an event on Monday in New York apologized profusely for what VW had done, saying: “We have totally screwed up.”
Speaking last week at the Frankfurt International Motor Show, Mueller, who has an apartment in a trendy part of Stuttgart rather than a sequestered villa on the outskirts, displayed a range of interests, discussing issues from illegal immigration in Europe to competition from Tesla Motors Inc. and potentially also Google Inc. And, although the diesel scandal hadn’t broken yet, he seemed ready to face the challenges ahead.
“It won’t be boring in our business,” he said in an interview.
Written by Chris Reiter, Elisabeth Behrmann, and Chad Thomas