New Volkswagen boss tries to drag carmarker out of scandal

VW-new-ceoVolkswagen’s new boss began trying to pull the embattled carmaker out of the wreckage of a pollution test rigging scandal Saturday, as the United States and Switzerland banned the sale of the group’s new diesel cars.

The 62-year-old former Porsche chief Matthias Mueller was tapped Friday 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.

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.

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 investigaton 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 learned 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.

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 percent of Volkswagen held by Japanese carmaker Suzuki to show its “faith” in the group.

– ‘Moral, policy disaster’ –

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.

“Europe’s most important automobile group faces a new beginning” while “the scandal is growing bigger and bigger,” German FAZ daily wrote Saturday.

Berthold Huber, who heads Volkswagen’s supervisory board, on Friday said the scam was “a moral and policy disaster” for the firm.

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

– New strategy needed –

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, while ratings agencies have warned they may cut Volkswagen’s credit rating, which could increase the company’s financing costs.

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 percent this year.

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