Volkswagen names new CEO as scandal's fallout spreads

Porsche chief takes helm at Volkswagen
Porsche chief takes helm at Volkswagen

Volkswagen appointed a new CEO on Friday at it tried to contain a pollution scandal that continues to land new blows on its reputation.

The head of Porsche -- Matthias Mueller -- was promoted to the top job at Volkswagen just hours after the German government said the group had illegally manipulated emissions tests on 2.8 million diesel vehicles in Germany.

"The manipulation of diesel emissions by Volkswagen is forbidden and illegal, there's no doubt about that," Alexander Dobrindt, the government's top transport official told lawmakers.

The revelation comes a week after the company was found to have falsified U.S. pollution tests on half a million VW and Audi diesel cars.

Martin Winterkorn stepped down as head of the world's biggest automaker Wednesday in the wake of the shocking admission that it may have manipulated emissions data for as many as 11 million vehicles worldwide.

Volkswagen (VLKAY) programmed software to make the cars appear cleaner than they were when being tested. Once on the road, they would pump out up to 40 times the allowed level of nitrogen oxide.

Winterkorn, who claimed to know nothing about the cheating, apologized twice and said he was stunned by the scale of the misconduct. The company has been forced to set aside 6.5 billion euros ($7.3 billion) to cover the cost of the scandal, and the final bill could be many times that.

Volkswagen's board appointed Mueller after a meeting that lasted several hours. A number of employees have been suspended pending an internal investigation.

volkswagen ceo matthias mueller car
Volkswagen's new CEO, Matthias Mueller.

Mueller said he was confident the group would overcome the crisis, and could emerge even stronger given its innovation, brands and talented staff.

"Most important is that this is never allowed to happen again at Volkswagen," he told reporters.

Related: Complete coverage of Volkswagen's crisis

Volkswagen would implement the "most stringent compliance and governance standards in our industry," he said.

But he has an enormous challenge on his hands.

The crisis has shaken the trust of consumers and investors in one of Germany's engineering icons, which employs some 600,000 people worldwide and accounts for roughly one in 10 vehicles sold globally.

About a quarter of the company's market value has been wiped out this week, leaving powerful shareholders such as the Porsche family, Qatar and the German state of Lower Saxony nursing big losses.

U.S. regulators could impose fines worth billions of dollars, and prosecutors on both sides of the Atlantic are considering launching criminal investigations. A spokesman said the U.S. Department of Justice is taking the allegations "very seriously."

VW and Audi drivers are furious too. At least 34 lawsuits have already been filed in the U.S. by people claiming their cars are now less valuable because of the scandal. Dealers could also sue the company for compensation.

Volkswagen is under huge pressure to provide details about what went wrong in Europe, where half of all new cars sold are diesels, and to identify who was responsible. It has promised to work with prosecutors to ensure the perpetrators face the full consequences of causing "unmeasurable harm" to the company.

German regulators are carrying out spot checks on diesel cars made by Volkswagen and other manufacturers, and Britain is rerunning laboratory tests and comparing them with "real world driving emissions" to try to establish the scale of the problem.

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