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Volkswagen Set to Oust Matthias Müller as C.E.O. After Diesel Scandal Volkswagen Set to Oust Matthias Müller as C.E.O. After Diesel Scandal
(about 4 hours later)
FRANKFURT — Volkswagen was set on Tuesday to oust Matthias Müller as chief executive as it grapples with a long-running diesel emissions scandal that has cost it billions of dollars, led to the imprisonment of two executives, and scarred the German carmaker’s reputation. FRANKFURT — Volkswagen is set to oust its chief executive, Matthias Müller, as it grapples with a diesel emissions scandal that has cost it billions of dollars, led to the imprisonment of two executives, and scarred the German carmaker’s reputation.
Herbert Diess, a former BMW executive who is in charge of cars sold with the Volkswagen brand, was likely to succeed Mr. Müller, according to two people with knowledge of the internal discussions. The company said earlier on Tuesday that it was considering replacing Mr. Müller, and a final decision is expected by the end of the week. Herbert Diess, who is in charge of the company’s flagship Volkswagen brand, was likely to succeed Mr. Müller, according to two people with knowledge of the internal discussions. The company said earlier on Tuesday that it was considering a leadership change, and a final decision was expected by the end of the week.
Mr. Müller, who took over after the company admitted in September 2015 that it had cheated on diesel emissions tests, has steadfastly denied any knowledge of the deception. The cheating involved the installation of illegal software in 11 million Volkswagen diesel vehicles, playing a major role in creating a serious air pollution problem in Europe. While there was no obvious trigger for Mr. Müller’s departure at this moment, his efforts to lead the company beyond the 2015 emissions cheating scandal have stalled.
Mr. Diess carries less baggage than Mr. Müller, a longtime insider, because he arrived at Volkswagen only a few months before the scandal erupted. And Mr. Diess has led Volkswagen’s push to mass produce electric cars, which are seen as essential to the company’s long-term success. The repercussions of the wrongdoing have continued to multiply, tainting not only Volkswagen but also its rivals BMW and Daimler just as they are dealing with an industrywide shift toward electric and self-driving vehicles. Political leaders are pressing the German carmakers to compensate diesel owners who bought cars that turned out to be dirtier than advertised, which could add to the already astronomical cost of the scandal.
Volkswagen gave no indication what prompted the management shake-up, two and a half years after the company’s emissions cheating came to light. Under Mr. Müller, sales have held up and the company remains profitable. Word of Mr. Müller’s expected departure came only days after Deutsche Bank, Germany’s largest lender, fired its chief executive, John Cryan, amid chronic losses. The boardroom turmoil at two of the country’s most prominent companies is symptomatic of the clouds that are beginning to gather around the German economy. While unemployment is at record lows, other recent indicators have pointed to slower growth, including falling industrial production.
But Mr. Müller struggled to deliver on promises to remake Volkswagen’s authoritarian company culture, while the carmaker continued to suffer blows to its reputation. Mr. Müller, 64, took over Volkswagen amid the worst crisis in its postwar history, days after it admitted in September 2015 that it had cheated on diesel emissions tests, installing illegal software in 11 million vehicles.
Volkswagen remains the target of a wide-ranging criminal investigation that has included searches of Mr. Müller’s offices. However, there has been no new revelation that would have prompted Mr. Müller to leave now, said Klaus Ziehe, a spokesman for the prosecutors in Braunschweig who are conducting the inquiry. He succeeded in preventing a collapse of sales and profits. But Mr. Müller, who has spent his entire career at Volkswagen or its subsidiaries, struggled to deliver on his promises to remake the company’s insular culture. The carmaker continued to suffer blows to its reputation, including revelations in January that it had financed tests on monkeys in a bungled attempt to show that diesel exhaust was not as dangerous as it once was.
Widely respected for his knowledge of cars, Mr. Müller, 64, is a manager of the old school who has spent his entire career at Volkswagen and its subsidiaries. As someone steeped in the company’s top-down, engineer-oriented culture, he may have been ill-suited to lead wholesale change. Mr. Diess, 59, carries less baggage than Mr. Müller because he arrived at Volkswagen only a few months before the diesel scandal erupted. And Mr. Diess has led Volkswagen’s push to mass produce electric cars, which are seen as essential to the company’s ability to defend itself against challengers like Tesla, Uber and Google that are trying to remake the auto industry.
Mr. Müller was a high-ranking executive involved in product development at the same time that Audi and Volkswagen were concocting the illegal software and deploying it in vehicles. Mr. Müller also worked closely with some of the people under investigation over possible involvement in the emissions conspiracy. Even if ignorant of the wrongdoing, as he has insisted, Mr. Müller faced the accusation that he was part of a system that allowed it to take place. “This is a chance for Volkswagen to make a change,” said Christian Strenger, the former chief executive of Deutsche Bank’s wealth management division, who is suing Volkswagen because he said it violated its duty to shareholders by failing to be forthcoming about the emissions scandal. But Mr. Strenger said that Mr. Diess would have to “have the guts to clean things up.”
In a statement, Volkswagen said it was considering “a further development of the management structure of the group,” which could “include a change in the position of the chairman of the board of management,” referring to Mr. Müller. The company said it had not yet made a final decision to replace him, but merely calling his status into question effectively sealed his fate. Volkswagen is still the target of a wide-ranging criminal investigation that has included searches of Mr. Müller’s offices. However, there has been no new information that would have prompted Mr. Müller to leave now, said Klaus Ziehe, a spokesman for the prosecutors in Braunschweig who are conducting the inquiry.
Mr. Diess has a shorter history at Volkswagen but would nonetheless satisfy the company’s longtime preference for choosing chief executives from its own ranks. German prosecutors have not charged anyone in the Volkswagen case, but they expect to complete their investigation this year. Two former Volkswagen executives, James Liang and Oliver Schmidt, are serving prison sentences in the United States after pleading guilty to charges including conspiracy to violate the Clean Air Act.
The scandal, and Volkswagen’s continued vulnerability to it, came into renewed focus after The New York Times reported in January that the company had helped to finance experiments on monkeys in a bungled attempt to show that exhaust from modern diesels was benign. Mr. Müller was a high-ranking executive involved in product development at the same time that the company was concocting the illegal software and deploying it in vehicles. He also worked closely with some of the people under investigation over possible involvement in the emissions scandal. Mr. Müller has insisted he was ignorant of any wrongdoing, but he has nonetheless faced the accusation that he was part of a system that allowed it to take place.
The experiments, in which monkeys were forced to breathe diesel fumes at a lab in Albuquerque, caused a furor in Germany and elsewhere. Chancellor Angela Merkel condemned the research, the German Parliament debated possible consequences, and animal rights activists demonstrated outside Volkswagen’s headquarters in Wolfsburg. In a statement on Tuesday, Volkswagen said it was considering “a further development of the management structure of the group,” which could “include a change in the position of the chairman of the board of management,” referring to Mr. Müller. The company said it had not yet made a decision on him, but merely calling his status into question effectively sealed his fate.
Mr. Müller promised to change Volkswagen’s corporate culture to be less authoritarian and less prone to the kind of behavior that led to the emissions cheating. At the same time, he presided over a management board still dominated by people who, like himself, were products of that culture. Mr. Diess has a shorter history at Volkswagen than most other members of the management board, but he would nonetheless satisfy the company’s longtime preference for choosing chief executives from its own ranks. He joined Volkswagen in July 2015 from BMW, where he had been a member of the management board in charge of product development. He has succeeded in improving the profitability of the division that makes Volkswagen brand cars like the Golf, Jetta and Passat. The division accounts for most of the cars that Volkswagen sells but is far less profitable than the company’s Audi and Porsche luxury brands.
Critics said that, as a longtime insider, Mr. Müller lacked the credibility needed to force change within Volkswagen. Mr. Diess, who managed factories in Britain for BMW, is much more comfortable speaking English than Mr. Müller and will have an easier time communicating with investors and media outside Germany. Mr. Diess has also not spent his career steeped in Volkswagen culture and may be in a better position to change it.
Volkswagen’s stock price rose almost 5 percent, to 172 euros, or about $211, per share, on the news of Mr. Müller’s potential departure. They are about 2 percent higher than their value when the company made its diesel admission in 2015. But he will most likely face resistance from entrenched interests within the company. He has already clashed with Volkswagen’s powerful workers council, which has de facto veto power over major decisions.
The emissions scandal has had wide-ranging impacts beyond the company. And Mr. Diess must answer to Hans Dieter Pötsch, the chairman of the supervisory board and former chief financial officer of Volkswagen. Mr. Pötsch is a confidant of the Porsche family, which via a holding company owns more than half of Volkswagen’s shares. The family, descendants of the man who created the Volkswagen Beetle for Adolf Hitler, has been criticized by shareholders for failing to appoint more independent members of the supervisory board and resisting more sweeping change.
For one, it has contributed to increased wariness of diesel. The fuel had been seen as more environmentally friendly than gasoline because it emits lower levels of greenhouse gases, but it nevertheless spews out poisonous nitrogen oxides. As a result, cities across Europe have taken steps to restrict the use of diesel vehicles in urban centers, and sales of diesel cars have slowed dramatically across the region. The challenges that Mr. Diess faces are considerable. Even now, the diesel scandal continues to corrode Volkswagen’s reputation.
The diesel cheating and its aftermath has also focused attention on the tight links between Germany’s political elite and the auto industry. Carmakers employ around 800,000 people in Germany and are the country’s highest-value export. But as politicians in Berlin have refused to crack down on car companies, voters have increasingly seen them as complicit with the industry. In January, The New York Times reported that the company had helped to finance experiments in which monkeys were forced to breathe diesel fumes at a lab in Albuquerque. The exposure of the research caused a furor in Germany and beyond. Chancellor Angela Merkel condemned the experiments, the German Parliament debated possible consequences, and animal rights activists demonstrated outside Volkswagen’s headquarters in Wolfsburg.
Volkswagen’s cheating has also had an effect on the wider industry. Diesel was once the most popular engine option in Europe because of its fuel economy. But diesel vehicle sales have been dropping since Volkswagen’s deception was uncovered.
The scandal exposed the degree to which virtually all of the European carmakers took advantage of regulatory loopholes to sell diesels that polluted far more in everyday use than in official tests, causing poor air quality that led to thousands of premature deaths. As a result, cities across Europe have taken steps to restrict the use of diesel vehicles in urban centers. German carmakers have suffered the most from the backlash because of their dependence on the technology.
Volkswagen’s stock price closed the day 3.1 percent higher, at 169 euros, or about $208, on the news of Mr. Müller’s upcoming departure.