Volkswagen under pressure as emissions scandal deadlines loom
Hans Dieter Poetsch’s first board meeting as chairman of Volkswagen on Wednesday could turn out to be his most important, coming just hours before a deadline set by German regulators and testimony by the company’s top U.S. executive in Congress.
More than two weeks after the carmaker admitted to cheating U.S. emissions tests, Poetsch will be appointed to the helm of the 20-person supervisory board at a specially convened meeting at the German company’s headquarters in Wolfsburg.
Sources close to the company say the meeting, due to start at 9 a.m local time (0700 GMT), is likely to last for hours, given the number and gravity of the issues to be discussed.
Europe’s largest carmaker is under huge pressure to find those responsible for installing software in diesel engines to rig emissions tests, to say how affected vehicles will be fixed and to what extent it may also have cheated in Europe.
The biggest business crisis in Volkswagen’s 78-year history has wiped more than a third off its share price, forced out its long-time chief executive and sent shockwaves through both the global car industry and the German establishment.
On Tuesday, more than 20,000 workers gathered at the company’s sprawling Wolfsburg plant to hear new CEO Matthias Mueller address them for the first time since he replaced Martin Winterkorn two weeks ago.
“We will overcome the crisis,” Mueller told staff, many of them wearing specially printed t-shirts with the slogan “one team, one family” to show their support for the company.
Mueller warned all projects and investments would be put under review and there would be “massive cuts”.
But Volkswagen’s ability to recover could also depend on what happens on two key dates this week: Germany’s KBA watchdog has set a Wednesday deadline to submit a plan to make its cars compliant with emissions laws and the company’s top U.S. executive is due to testify before a U.S. congressional oversight panel on Thursday.
Since Volkswagen’s cheating was exposed on September 18, the carmaker has come under fire for a slow response.
While it admitted on Sept. 22 that 11 million diesel vehicles worldwide were fitted with illegal software, it only provided customers with information about whether their cars and vans were affected on Friday.
Owners have been told their vehicles will have to be refitted, but do not know if this will affect their fuel economy or performance — key issues that could determine the number of lawsuits and amount of damage to Volkswagen’s reputation.
Analysts and investors are also anxious to know whether Volkswagen cheated emissions tests in Europe too. The German transport ministry has said it did, but has not given details.
Given 8 million of the 11 million affected vehicles are in the European Union, any cheating there could have a bigger impact than the United States in terms of fines and lawsuits.
“We need clarity on Europe,” Bernstein analyst Max Warburton wrote in a research note this week.
“If the issue is just limited to the U.S. … then the financial consequences may be containable. But if VW also cheated in Europe, then the situation will become much graver.”
Metzler Equities analyst Jurgen Pieper said Volkswagen was likely to scale back expansion plans in emerging markets such as China and South America — which are slowing anyway — to save money, rather than cut back on research and development.
He added the company could probably access around 20 billion euros ($22 billion) and raise up to about 10 billion each of debt and equity before it would need to consider selling assets, such as its trucks business.
Volkswagen’s supervisory board will also be under pressure to come up with answers about who was responsible for installing the “cheat” software and concealing its usage.
The company has suspended more than 10 senior managers, including three top engineers. However, one source close to the supervisory board told Reuters on Monday the carmaker’s internal inquiry had not found any evidence to accuse the top engineers of the manipulation.
Volkswagen has said its investigations, including an external one by U.S. law firm Jones Day, would take months.
But a panel of U.S. lawmakers will want answers when they question the company’s U.S. boss Michael Horn on Thursday.
Two senior officials from the U.S. Environmental Protection Agency will also testify at the congressional hearing, the oversight committee said on Tuesday.
Two sources close to the board said Wednesday’s meeting would look to provide Horn with detailed information and a timeline on the rigging of U.S. emissions tests.
CEO Mueller and an official from Jones Day will attend the supervisory board meeting, sources said.
The rise of both Poetsch and Mueller signal a return to influence for Volkswagen’s long-time chairman Ferdinand Piech, who was ousted in April after he publicly criticized Winterkorn’s performance.
Piech, a member of the Porsche-Piech clan that owns a controlling stake in the German carmaker, has supported both managers in their careers.
The 78-year-old, who considers Volkswagen his life’s work, was likely to exert renewed influence under the new regime in areas such as brand management and model strategy, a source close to the matter said.
After keeping away from the company in the months after his ouster, Piech and his wife Ursula visited the Volkswagen stand at the Frankfurt auto show on Sept. 22, four days after the emissions scandal broke and the day before Winterkorn resigned.
Some analysts and investors have questioned Volkswagen’s decision to appoint company insiders to top jobs in the wake of the scandal, saying hiring outsiders would underscore its commitment to change.
But there was a mood of grim determination on Tuesday in Wolfsburg, where Volkswagen employs around 70,000 people.
“I’m convinced that things will be better in the future. I was born in Wolfsburg and have been connected with the company for many years. The whole region depends on the factory,” said Petra Skotzylas, who works in the plant’s Autovision department.