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Other German brands fear backlash

VW boss resigns as emissions scandal engulfs car maker

Martin WinterkornVolkswagen chief executive Martin Winterkorn resigned today as the diesel emissions scandal claimed its first scalp.

Mr Winterkorn said in a company statement that he was “shocked by the events of the past few days”.

He added: “Above all, I am stunned that misconduct on such a scale was possible in the Volkswagen Group.”

He said he was not aware of any wrongdoing on his part but had accepted responsibility for the irregularities found in diesel engines. He said he had requested the supervisory board to agree on terminating his role as chief executive.

“I am doing this in the interests of the company even though I am not aware of any wrong doing on my part. I am clearing the way for a fresh start with my resignation.”

His departure still leaves the company fighting for its credibility – even survival. It has been renowned for quality and stability and has been a totem for German engineering. The nation’s other car makers have been shaken by the crisis and fear it will damage their own sales worldwide.

VW’s value has fallen by a third since it announced it would set aside $7.3 billion for recalls and “other efforts to win back the trust of our customers” – a process which looks like the mother of all PR tasks.

The company has admitted cheating on US emissions tests after European regulators noticed discrepancies between emissions and performance test results and drivers’ actual experiences. Tests carried out by experts at West Virginia University confirmed the differences.

VW had installed a software “defeat device” which altered readings of engine performance during testing.

The company now faces criminal investigations, civil lawsuits and multi-billion dollar fines that could be as high as $18 billion, or $37,500 per car sold in the US.

Fines of $900m imposed on General Motors for faulty ignitions and $1.2bn on Toyota for unintended acceleration, now look paltry by comparison.

VW’s potential penalty is higher largely because the offence will be regarded as deliberate rather than a result of poor engineering or management error. It also covered up its actions for at least a year.

 

Mr Winterkorn was at least prepared to confess the company’s misdemeanour when he made a public pronouncement this week. “We have totally screwed up,” he told those attending a Brooklyn gathering to launch the new Passat. “Our company was dishonest…with all of you.”

The damage to VW’s reputation could spread to a consumer backlash. Investors, which include the Lower Saxony region of Germany which has a 20% stake in the company, have lost billions.

Mr Winterkorn laid the blame on the “terrible mistakes of a few people,” but despite denials from the company it looks likely he will be the one who pays the ultimate price.

 

 

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