VW’s Audi CEO arrested in Germany over diesel scandal

Bram Schot named as Audi’s interim CEO: Sueddeutsche Zeitung

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FRANKFURT: Volkswagen was holding crisis talks on Monday to find a stand-in boss for its Audi brand, a source familiar with the discussions said after the German authorities arrested Audi CEO Rupert Stadler as part of a probe into emissions test cheating.

Stadler is the most senior company official to be detained so far since Volkswagen (VW) admitted in September 2015 to using illegal software to rig U.S. emissions tests on diesel engines.

Munich prosecutors, who widened their probe into Audi earlier this month, said Stadler was being held due to fears he might hinder their investigation into the scandal, plunging VW into a leadership crisis.

“We need to find a solution for Audi’s leadership for the time when he is not here,” the source familiar with the talks said about Stadler’s position. “We will comment on this later.”

VW and Audi directors were discussing the leadership crisis in separate meetings on Monday.

VW has set aside around $30 billion to cover fines, vehicle refits and lawsuits since its “dieselgate” scandal broke and has announced plans to spend billions more on a shift to electric vehicles as it seeks to rebuild its reputation.

Whereas the group CEO Martin Winterkorn resigned in the days after the cheating was disclosed, Stadler has remained in post and was this year promoted by new VW boss Herbert Diess in an overhaul aimed at speeding up the group’s reforms.

“His arrest is another low point in VW’s diesel saga,” said Evercore ISI analysts, who have criticized the group for a slow pace of reform. “Almost three years after the diesel scandal broke, it takes police to take action against the Audi CEO.”

The United States filed criminal charges against Winterkorn in May, but he is unlikely to face US authorities because Germany does not extradite its nationals to countries outside the European Union.

The Munich prosecutors said the move against Stadler was not made at the behest of US authorities. The 55-year-old was arrested at his home in Ingolstadt in the early hours on Monday, they said.

“There were clear signs that there was to be an effort to influence people and other suspects. Therefore we issued an immediate arrest warrant,” Stephan Necknig, a spokesman for the Munich prosecutor’s office, told German tabloid Bild, explaining the reasons for Stadler’s arrest.

Audi and VW said Stadler was presumed innocent unless proved otherwise. Stadler himself was not immediately available for comment.

At 1325 GMT, VW shares were down 3.6 per cent at 155.30 euros, one of the biggest falls by a European blue-chip stock.

UNDER FIRE

Stadler has been under fire since Audi admitted in November 2015 – two months after parent VW – that it also installed illegal “defeat device” software to cheat US emissions tests.

Munich prosecutors are investigating whether Stadler acted swiftly enough to stop deliveries of manipulated Audi models in Europe once emissions problems had emerged, a person familiar with the matter has told Reuters.

Stadler has held onto his post mainly thanks to the backing of members of VW’s controlling Porsche-Piech families. Before becoming Audi CEO in 2007, Stadler worked as chief of staff to VW’s former chairman Ferdinand Piech.

Earlier this month, Munich prosecutors widened their probe at Audi to include Stadler and another member of Audi’s top management, investigating them for suspected fraud and false advertising.

Stadler’s arrest will raise tensions on VW’s supervisory board, putting at risk a fragile truce between management, labour representatives and board members from the carmaker’s home region of Lower Saxony.

Most of VW’s emissions problems have been in the United States, where a total of nine people have been charged and two former VW executives have pleaded guilty and been sentenced to prison terms.

But investigations are continuing elsewhere. Last week, German prosecutors fined VW 1 billion euros ($1.2 billion) over the scandal.

Enter Bram Schot

Volkswagen’s supervisory board has nominated Bram Schot as interim chief executive at its luxury brand Audi following the arrest of Rupert Stadler, Germany’s Sueddeutsche Zeitung said on Monday, without citing sources.

Audi is a division of Volkswagen. Audi’s supervisory board has yet to sign off on the nomination, Sueddeutsche said.

A Volkswagen spokesman said the carmaker had not yet made a formal decision about a new chief executive for Audi.