BERLIN -- Volkswagen CEO Martin Winterkorn showed no sign of quitting as he faced a reckoning today with the executive committee of the automaker’s supervisory board.
Senior figures on the board's five-member committee were questioning Winterkorn on how the automaker cheated U.S. emissions tests in a meeting at the company's headquarters in Wolfsburg, Germany. There was no word on whether the committee reached a decision on Winterkorn's future.
Winterkorn, 68, is due to have his contract extended by the full supervisory board on Friday after a hitherto highly successful eight-year reign, in which the company doubled its sales and almost tripled its profits.
A source familiar with the deliberations said the board was in a "tricky situation," trying to make a decision without yet knowing the full extent of the CEO's role in the scandal.
A story in the Tagesspiegel newspaper, denied by Volkswagen, said the board would replace Winterkorn with Matthias Mueller, head of the automaker's Porsche sports car business.
VW is under huge pressure to act, with its shares down more than a third in value since the crisis broke. German Chancellor Angela Merkel has called for it to move "as quickly as possible" to restore confidence in a company held up for generations as a paragon of German engineering excellence.
"VW needs a fresh start and in our view a new CEO," said Evercore ISI analyst Arndt Ellinghorst.
A critical point for the VW board is what Winterkorn knew about a scheme intended to dupe regulators and consumers about emissions of diesel engines installed in 11 million cars worldwide, according to a person familiar with the matter who asked not to be identified because the talks are private.
Winterkorn's survival hangs on convincing a few key power players, including Wolfgang Porsche, head of the family that controls a majority of VW’s voting shares; Bernd Osterloh, VW’s influential labor leader; and Stephan Weil, prime minister of Lower Saxony, which has special blocking rights at the company. All three are on the executive committee.
Winterkorn, who has run VW since 2007, is responsible for product strategy, putting him at the center of the storm that has wiped out about 24 billion euros ($26.7 billion) in Volkswagen’s market value since the start of the week.
Volkswagen shares fell as much as 9.9 percent to 95.51 euros in Frankfurt today, bringing the decline since the scandal started to 41 percent. The stock was down 2.7 percent at 9:25 a.m.
Possible replacements
Should Winterkorn end up going, possible replacements are Mueller, who is backed by members of the Porsche family, and Herbert Diess, who recently came over from rival BMW, one person said. Mueller oversees the marque that’s a profit driver for the group. Diess, who joined in July to take charge of the VW brand, helped BMW cut billion of euros in purchasing costs during the financial crisis.
When former Chairman Ferdinand Piech sought to oust Winterkorn in April, VW’s key figures quickly rallied behind the CEO. That hasn’t been the case during the current scandal.
The supervisory board's meeting this coming Friday was arranged before the scandal broke. It is supposed to sign off on Winterkorn's contract extension, which was announced a few weeks ago. In a video statement posted on Volkswagen’s media website on Tuesday, Winterkorn vowed to get to the bottom of the scandal, without indicating if he plans to stay on or leave.
"At present we do not yet have all the answers to all the questions,” said Winterkorn, looking stern-faced as he said he was “endlessly sorry” for the confidence lost. “But we are working hard to find out exactly what happened. To do that, we are putting everything on the table, as quickly, thoroughly and transparently as possible."
Winterkorn did not specifically comment on his role in rigging VW cars with software that only turned on full pollution controls during tests. The vehicles emitted as much as 40 times the legal limit of pollutants when they were on the road, the U.S. Environmental Protection Agency alleges.
In Winterkorn’s favor is his track record of boosting deliveries 77 percent and catapulting Volkswagen to outselling Toyota Motor Corp. for the the No. 1 spot globally in the first half. Winterkorn is also CEO of Porsche Automobil Holding SE, the company that manages the stake owned by the descendants of VW Beetle creator Ferdinand Porsche.
Collapsing stock
Working against Winterkorn is a collapsing stock price and mounting costs of addressing the crisis. Volkswagen is setting aside at least 6.5 billion euros, while the EPA probe alone exposes the company to fines of as much as $18 billion. Regulators from Germany, France, South Korea and Italy have vowed to scrutinize Volkswagen’s vehicles. And then there’s potential for lawsuits as well as criminal charges for executives.
“Winterkorn’s personal brand has been built on being ‘the engineer’s engineer’ and the ‘detail main’,” Max Warburton, an analyst with Sanford C. Bernstein & Co., said in a note. “This is an engineer, who theoretically should have asked questions about how VW suddenly improved its emissions to meet Californian standards.”
Reuters and Bloomberg contributed to this report
