Investors welcome hints of fresh start, new CEO at Volkswagen

Going, going, gone? Matthias Mueller's fate at Volkswagen seems to be hanging in the balance
AFP

Frankfurt am Main (AFP) – Investors sent stock in scandal-hit car giant Volkswagen surging Tuesday, as the firm announced it was considering reshuffling its board and replacing chief executive Matthias Mueller.

“The Volkswagen group is considering further evolving the leadership structure, which could be connected with changes in the board… a change to the chief executive could be involved,” VW said in a statement.

Mueller had “signalled he was open to play a part in the changes” in conversations with supervisory board chief Hans Dieter Poetsch, the statement continued.

Shares in Volkswagen leapt on the news, adding as much as five percent before falling back slightly to gain 4.5 percent on the day, at 171.58 euros ($211.62) by close of trade in Frankfurt.

Business newspaper Handelsblatt and national news agency DPA reported Herbert Diess, head of the VW brand — one of the group’s 12 makes of cars, trucks and motorbikes — was slated to take Mueller’s place.

Meanwhile Germany’s biggest-selling newspaper Bild reported that a change of CEO “has been planned for months” by the Porsche and Piech families, descendants of VW Beetle inventor Ferdinand Porsche who control holding company Porsche SE, VW’s majority shareholder.

The curtain could fall on Mueller’s leadership as soon as Friday, when multiple sources including Bild and Handelsblatt reported the supervisory board will meet.

A Volkswagen spokesman declined to comment on the rumours when contacted by AFP.

Mueller, a former chief executive of sportscar-building VW subsidiary Porsche AG, was brought in to replace Martin Winterkorn in 2015 and is contracted to serve until 2020.

Longtime CEO Winterkorn quit after the firm admitted to manipulating 11 million diesel vehicles worldwide to cheat regulatory emissions tests in a scandal that became known as “dieselgate”.

Software known as a “defeat device” allowed vehicles to reduce exhaust pollution under test conditions, while in on-road driving conditions they emitted much higher levels of pollutants.

Mueller has chivvied the mammoth carmaker into a massive restructuring, aiming offer electric versions of many of its models and slim down its operations over the coming decade.

But he himself has landed in prosecutors’ sights over suspicions he may have known about the diesel cheating before it became public and failed in his duty to inform investors.

Last month, Mueller said that chief executives of big companies deserved high pay because “one always has one foot in jail”.

“The most important part of getting the crisis under control is over now, so it’s right for VW to look in a new direction,” judged analyst Juergen Pieper of Metzler bank.

Diess, known as a “very good cost manager” with experience at BMW, would be “the best solution as a successor for the next five years,” he added.

– Dogged by scandal –

Dieselgate has cost VW more than 25 billion euros ($31 billion) in buybacks, fines and compensation, and the carmaker remains mired in legal woes at home and abroad.

Meanwhile the cloud of distrust around diesel fuel has hit sales more widely, with their market share in Germany plunging to 32.5 percent in February — 19.5 percentage points lower than a year before.

The scandal’s tentacles have entangled other carmakers, spurring them into new efforts to burnish their environmental credentials, especially with announcements of slews of new electric models.

Prosecutors have raided Mercedes-Benz maker Daimler looking for evidence of defeat devices.

And BMW admitted earlier this year that some of its models included software that could have fooled regulators’ pollution tests — while insisting it was built in by mistake.

All three companies also helped fund a study that tested diesel exhaust gases on monkeys, details of which emerged in January to fresh uproar and resulted in the suspension of VW’s chief lobbyist Thomas Steg.

The carmaker-financed research group responsible had also ordered a study testing the effects of diesel exhaust inhalation on humans.

But profits at VW have returned to a similar level as before the scandal broke, reaching 11.4 billion euros last year as consumers appeared to shrug off the controversy.

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