Scandal-hit Volkswagen names Porsche boss new CEO

Wolfsburg, Germany: Embattled carmaker Volkswagen (VW) tapped Porsche chief Matthias Mueller on Friday (Sep 25) 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.

The 62-year-old Mueller replaces Martin Winterkorn, who was forced to resign Wednesday over the stunning revelations by US environmental authorities that the German carmaker had fitted some of its diesel cars with software capable of tricking environmental tests - a scam that could lead to fines worth more than US$18 billion (S$25 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 and back on when tests are being conducted.

Calling the cheating a "moral and policy disaster," the company's supervisory board chief Berthold Huber said the group is now looking to Mueller, who "knows the company and its brands," to tackle the crisis.

Board member Bernd Osterloh added that "a small group had caused great damage to Volkswagen."

Mueller himself vowed that his "most pressing task will be to restore confidence in the Volkswagen Group - through an unsparing investigation and maximum transparency, but also by drawing the right lessons from the current situation."

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

Mueller has a daunting task ahead given the global amplitude of the scandal. Authorities from India to Norway have 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," said Christopher Grundler, director of the EPA Office of Transportation & Air Quality. "We're not going to tell them what these tests are, they don't need to know."

An hour before the group announced its new chief, VW shares closed 4.32 percent down Friday at 107.30 euros, after a week of haemorrhage which saw a third of its market capitalisation - or over 20 billion euros - wiped off.

‘THE IMPERTURBABLE’

Mueller, born in Chemnitz in the former communist East Germany, was appointed chief executive at Porsche in 2010 and enjoys the backing of the Volkswagen group's family shareholders. Newspaper Die Welt dubbed him "the imperturbable" and said he is someone who knows "how to use his elbows."

"But I don't see it as playing foul, rather as a sign of perseverance and mettle," the daily quoted him as saying.

Mueller is a man "who loves cars and who loves people who love cars," added the newspaper.

He had already been tipped to take over VW 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' 3.54 million sold, 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.

In Britain, Transport Secretary Patrick McLoughlin said new checks would be carried out across the automobile industry and backed calls for a Europe-wide probe. 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.