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New boss tries to drag VW out of scandal

2015-09-27 15:50

RESCUE MISSION: New VW Group CEO Matthias Mueller has started the challenging task of getting the company out of hot water.Image: AFP / John Doughall

Berlin, Germany -Volkswagen's new boss began trying to pull the embattled carmaker out of the wreckage of a pollution test rigging scandal Saturday (Sept 26), as the United States and Switzerland halted the sale of the group's new diesel cars.

The 62-year-old former Porsche chief Matthias Mueller was tapped Friday (Sept 25) to replace Martin Winterkorn, who resigned over stunning revelations by US environmental authorities that the German carmaker had fitted some of its diesel cars with software capable of cheating environmental tests.

'New beginning'

German FAZ daily wrote Saturday: "Europe's most important automobile group faces a new beginning" while "the scandal is growing bigger and bigger," 

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 normally-- and back on when tests are being conducted.

The scam could lead to fines worth more than $18 billion (16.1 billion euros), while the German giant has already seen billions of euros wiped off its stocks this week.

Mueller has pledged an "unsparing investigation and maximum transparency" in his bid to restore confidence in the Volkswagen Group.

"We will overcome this crisis," he said Friday, adding that the carmaker could "emerge stronger from the crisis in the long term" if it learns from its mistakes.

For now however, the crisis shows no sign of abating with the US environmental regulator refusing to authorise the sale of Volkswagen's new diesel models.

Volkswagen introduced its new 2016 Passat - which includes a diesel version - in New York on Monday just as the scandal over cheating on pollution controls broke.

At that event Volkswagen America's chief executive, Michael Horn, said the company "totally screwed up".

Switzerland also temporarily suspended the sale of new Volkswagen diesel-engine models on Friday.

Growing bigger

Some 180 000 vehicles on Swiss roads made by Volkswagen's Audi, Seat, Skoda and VW brands between 2009 and 2014 could be affected by the scandal, the Federal Roads Office said in a statement.

France and Britain have announced new checks and the European Union has urged its 28 member states to investigate whether vehicles in their countries complied with pollution rules.

India and Mexico have also opened fraud probes into Volkswagen cars sold there.

VW's main shareholder said Saturday it was buying the 1.5% of Volkswagen held by Japanese carmaker Suzuki to show its "faith" in the group.

Outrage has continued to grow as the potential amplitude of the scandal broadened.

"A top-to-bottom cleaning is needed. Those responsible for this scandal must be punished," Ulrich Hocker, head of German shareholder union DSW, told press agency DPA.

Germany's Environment Minister Barbara Hendricks also expressed her anger, saying the scandal "casts a pall on the environmental promises of German companies," in an interview with Handelsblatt daily to be published Monday.

New impacts of the scandal continue to emerge, with one of the latest being fears over the financial future of the Volkswagen-owned football club.

Based in the northern German city of Wolfsburg, where the automaker is headquartered, the eponymous team may see its financial lifeline dry up.

The Japanese corporation's decision to sell up in the midst of the scandal came as a new sign of distrust in VW after it lost a third of its market capitalisation - over 20 billion euros - this week.

Volkswagen's shareholders, dominated by the Porsche SE holding company -- a separate entity to the luxury brand car -- are expected to hold emergency talks in Berlin on November 9.

New strategy needed

The German group had just overtaken the Japanese carmaker Toyota as the world's top car maker.

In an interview with FAZ that will be published in full on Sunday, Daimler's CEO Dieter Zetsche expressed "compassion" for his former VW opposite number Winterkorn, who was forced to quit Wednesday over the scandal.

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

Of the engines fitted with the defeat devices, 2.8 million are in Germany, according to the country's transport ministry.

The group says that five million Volkswagen brand vehicles - including the sixth-generation Golf, seventh-generation Passat and Tiguan models - are affected worldwide.

White-haired, blue-eyed Mueller now faces the daunting task of managing the scandal's financial and judicial consequences.

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

Mueller must also create a new strategy for the group, which in 2014 clocked up a record profit of 11 billion euros and sales of 202 billion euros.

Other challenges VW faces include competition in the fast-growing car market in China, where the German carmaker's sales have dropped by 5.8% this year.

More on VW emissions scandal:

Emissions scandal: Now SA affected?
VW turns to Porsche boss to steer it out of crisis
Emissions scandal: How VW's 'defeat device' works
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