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Volkswagen woes deepen as chairman gets emeshed in investigation

Monday, November 7, 2016 - 07:43

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Volkswagen AG's troubles deepened as supervisory board Chairman Hans Dieter Poetsch was added to a German probe of the company's emissions scandal and a newspaper reported that US testers found software to cheat air-quality tests in Audi cars this summer.

[FRANKFURT] Volkswagen AG's troubles deepened as supervisory board Chairman Hans Dieter Poetsch was added to a German probe of the company's emissions scandal and a newspaper reported that US testers found software to cheat air-quality tests in Audi cars this summer.

The carmaker on Sunday said the public prosecutor's office in Braunschweig, near its Wolfsburg headquarters, extended its investigation for alleged market manipulation to Mr Poetsch, who becomes the second current board member to be targeted.

Mr Poetsch and VW are supporting the inquiry, which relates to his time as chief financial officer, the company said in a statement.

Management "fulfilled its disclosure obligation under German capital markets law," VW said.

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A representative of the company's largest shareholder' voiced support for the chairman after the company's disclosure.

The disclosure is the latest dose of bad news for the iconic German automaker, mired in a scandal over software designed to cheat on emissions tests by operating cars differently under inspection than while being driven.

The scandal has cost former Volkswagen CEO Martin Winterkorn his job, sliced VW's market value, and has the company staring at a US$14.7 billion settlement covering 2.0-litre engine cars in the US.

Germany's biggest carmaker admitted last year to systematically rigging environmental tests for diesel emissions, exposing it to fines and other costs that have already reached US$20 billion.

Volkswagen has hired US law firm Jones Day to investigate the emissions affair, which has also led to the departures of Audi development chiefs Stefan Knirsch and Ulrich Hackenberg, and the company plans to comment on those findings by year's end.

More pain for VW could come as a US remedy is sought for 3.0-litre engine cars. By secretly adjusting how its cars performed under test conditions versus on the road, Volkswagen was able to market diesel engines' efficiency while not sacrificing driving performance.

Mr Poetsch was CFO of VW from 2003 to 2015 and he also sits on the supervisory boards of VW units Porsche AG and Audi. The market-manipulation investigation by Braunschweig prosecutors is also targeting Winterkorn and VW brand chief Herbert Diess over how they disclosed the scandal to investors. 

A spokeswoman for the state government of Lower Saxony, where the company is based, said it won't take a position on the latest investigation as it is a matter for the prosecutor and courts to handle.

The Porsche and Piech families, which control 52 per cent of VW's voting stock, backed the chairman. Wolfgang Porsche, the billionaire clan's top representative on VW's supervisory board, said in an e-mailed statement that "the Porsche and Piech families absolutely stand behind Mr Poetsch".

The families continue to share VW's view that the company has complied with disclosure rules, he said.

The state of Lower Saxony is the automaker's second-largest shareholder with a 20 per cent stake, followed by Qatar with 17 per cent. VW's preferred stock, its most widely traded, doesn't carry voting rights.

Volkswagen is also running into more potential trouble in the US Environmental authorities in California discovered certain Audi gasoline and diesel models with automatic transmissions that included software that would burn less fuel and emit less carbon-dioxide when on the test stand than while driven, according to Germany's Bild am Sonntag newspaper.

The findings made over the summer apply to cars including the Audi A6 and A8 and its Q5 SUV, the newspaper said. Audi had stopped installing the defeat devices in new vehicles by that time, Bild said.

Environmental authorities discovered that when the steering wheel of those vehicles was turned more than 15 degrees, as if backing out of a parking space, the emissions-limiting software disengaged, Bild reported.

An Audi spokesman declined to comment on the Bild report, citing ongoing negotiations with authorities.

Sports car label Porsche is also getting mired in the scandal. A Stuttgart court in September said it's likely to bundle nearly 150 lawsuits seeking about 900 million euros (US$1.384 billion) under a special procedure for large cases, akin to US class actions.

Porsche shareholders say they lost money because the company failed to disclose in a timely manner the risks Volkswagen faces from installing the test-defeating software.

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