Already Dethroned as CEO, VW’s Winterkorn Now Faces Prosecutors

German prosecutors take the first shot at former VW boss.

by on Sep.28, 2015

Martin Winterkorn in happier days when VW was racing to become the world's best-selling automaker.

Less than a week after tendering his resignation as Volkswagen AG CEO and taking responsibility – more or less – for the maker’s diesel emission test cheating scandal, Martin Winterkorn has found himself in the gunsights of German prosecutors.

After admitting it loaded special software into 11 million vehicles potentially letting them fool government emissions tests, VW has found itself at the center of a worldwide scandal. The maker has had to halt sales of those vehicles in the U.S., and has set aside $7.3 billion to cover the cost of the mess. But that could fall well short of its potential legal exposure, according to observers.

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And some corporate officials, including Winterkorn, could find themselves facing potential prosecution in the U.S., Germany and elsewhere. The once-powerful CEO is under investigation, the German prosecutor’s office noted, for “allegations of fraud in the sale of cars with manipulated emissions data.”

The scandal was touched off on September 18th when the U.S. Environmental Protection Agency revealed VW’s use of so-called “defeat device” software. The maker had tried to cover up the cheating, authorities contend, something that had gone on for seven years. The EPA itself is expected to formally order the recall of 482,000 VW diesel vehicles sold in the U.S. and could levy a fine of $37,500 per vehicle, or as much as $18 billion overall.

(VW promises fix for diesel problem “ASAP.” Click Here for more.)

Meanwhile, the U.S. Justice Department reportedly has launched its own criminal probe. Justice earlier in the month fined General Motors $900 million for delaying for a decade its ignition switch recall. It levied a $1.2 billion fine against Toyota in 2014 for mishandling a recall for unintended acceleration.

U.S. prosecutors decided not to seek criminal charges against any individual, but some sources say Justice may go that additional step against VW because of the long-running and intentional cover-up, company representatives directly lying, among other things, to the EPA.

Investigations have begun in a number of countries, from South Korea to Italy, authorities looking to see if, among other things, VW products sold in their markets also cheated on emissions.

But German regulators and politicians, frequently accused of going soft on the powerful auto industry, appear anxious to pull off their gloves this time.

For his part, Winterkorn attempted to walk a fine line when tendering his resignation last week. While he admitted “responsibility” for the cheating scandal, he appeared to be trying to minimize any indication that he was actually a player in the scheme.

“I am doing this,” he said of his decision to resign, “in the interests of the company even though I am not aware of any wrong doing on my part.”

Apparently, prosecutors aren’t quite ready to take the fallen executive at his word in a case that involves years of deceit by VW.

Winterkorn was replaced last Friday by Matthias Mueller, a VW veteran who had been running the Porsche brand. The new CEO will not only have to weather the storm created by the diesel cheating revelations, but also replace a raft of senior executives.

The VW board has already suspended three of its top engineers, Heinz-Jakob Neusser, head of brand development at the flagship VW marque, Audi R&D chief  Ulrich Hackenberg, and Wolfgang Hatz, who had the same job at Porsche.

(New VW CEO Mueller faces long list of major problems. Click Here for the latest.)

A subcommittee of the VW board indicated further ousters could follow. But the board itself is now operating under a cloud of suspicion after the publication of reports by several German newspapers that it failed to respond when notified of possible cheating by VW insiders. The giant German supplier Bosch had also reportedly advised the board of illegal modifications to the engine control software it provided for VW diesel models.

Lisa Earle McLeod, a widely used business leadership consultant from New York City, said she is not surprised by VW’s problems, or the fact that former CEO Winterkorn is facing a serious investigation.

“Volkswagen CEO Martin Winterkorn’s goal was to overtake Toyota and become the world’s biggest automaker. Notice he said biggest, not best. He accomplished that earlier this year. The team did everything they could to make the goal.”

(VW scandal amps up anti-diesel sentiment worldwide. Click Here for the latest.)

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One Response to “Already Dethroned as CEO, VW’s Winterkorn Now Faces Prosecutors”

  1. GT101 says:

    All of these investigations are necessary to determine who knew what and when. I hope the real criminals are properly prosecuted but I expect there will be scapegoats who are used and innocent people who get caught up in this scandal.

    Lisa Earle McLeod is incorrect. It was NOT Winterkorn’s goal to overtake Toyota in sales, it was Piech’s goal to be the highest volume auto company in the world that was forced on Winterkorn and other brand CEOs.

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