Michael Horn out as CEO at Volkswagen Group of America

Michael Horn, CEO of Volkswagen Group of America, is leaving the company six months after the German automaker admitted to rigging U.S. diesel emissions tests.

Horn, 54, is departing “by mutual agreement” to pursue other interests, effective immediately, VW said in a statement late Wednesday.

He will be replaced on an interim basis by Hinrich Woebcken, who on April 1 will take over as head of VW’s North American region.

Horn’s exit comes amid slumping U.S. sales at the VW brand and continued struggles to reach a deal with U.S. environmental regulators for fixes to some 600,000 VW Group vehicles fitted with illegal emissions-masking software.

Horn declined to comment late Wednesday when contacted by Automotive News.

Dealer response

A VW veteran with more than 25 years at the automaker, Horn took the reins of the company's top U.S. post in January 2014 and has since earned a reputation as a straight-talker, even when it meant acknowledging VW’s past mistakes in the U.S.

His candor, style and focus on improving dealer profits won him the broad respect among VW’s U.S. retailers, some of whom issued a statement Wednesday blasting his departure as a “serious blow.”

“The [VW] National Dealer Advisory Council wants to acknowledge Michael for his leadership and strength through the continued mismanagement of the diesel scandal that has plagued our sales and reputation more than any other global market,” VW’s dealer council said in a statement.

VW’s dealer council members praised Horn’s leadership while blasting the “continued mismanagement” of the diesel scandal, saying they were “deeply concerned” about the leadership change.

"There is no sense of a resolution to the diesel scandal,” the dealer council said. “We are troubled watching the mismanagement of this scandal from Germany, and how it may impact the ultimate decisions by the authorities in the United States. This change in management can only serve to put the company at more risk, not less.”

Other job offers

Alan Brown, general manager of Hendrick Volkswagen in Frisco, Texas, who is president of the National Volkswagen Dealer Advisory Council, praised Horn's tenure at VW and said he had talked to Horn over the last three days about his departure.

Brown told Reuters Horn had been offered other jobs at Volkswagen outside of the United States, but declined to take them.

Brown said it was critical VW maintain the strategy of growing U.S. volume and noted dealers have strongly supported the automaker through the crisis.

"We are not working out of gas stations any more," Brown said, noting VW's about U.S. 650 dealers have invested $1 billion over the last decade in facilities.

Brown plans to travel to Germany on Sunday and will stay through Wednesday for meetings with VW executives in the aftermath of Horn's departure.

Emissions scandal history

On Sept. 18, 2015, VW admitted to EPA charges that the automaker had installed devices on 482,000 diesel vehicles in the U.S. that allowed them to spew excess emissions.

The disclosure led to the resignation of VW CEO Martin Winterkorn in Germany and other executives. Just this week, Winterkorn’s successor, Matthias Mueller, said the scandal will inflict "substantial and painful" financial damage on the company, a toll that won’t be fully measured for years.

Horn's departure comes as VW continues to negotiate with the Justice Department and California on possible fixes or buybacks for the diesel vehicles.

A federal judge has given the company a March 24 deadline to come up with a fix acceptable to U.S. and California regulators.

Public face

During the initial response to the crisis, Horn was VW's public face in the United States, apologizing to customers in an online video, at media events and to members of Congress at a U.S. House of Representatives subcommittee hearing in October.

"Let's be clear about this: our company was dishonest -- with the EPA and the California Air Resources Board -- and with all of you. And in my German words: We totally screwed up. We must fix those cars," Horn said in New York on Sept. 21.

In October, Horn told a U.S. House of Representatives panel that VW's supervisory board and top leadership did not intentionally order the cheating, but said it was the work of a few individuals.

Asked by U.S. Rep. Joe Barton, R-Texas, if it made sense that a company like VW could allow a fraud to go on for seven years without top leaders knowing, Horn was blunt.

"I agree it is very hard to believe," he said. "Some people made the wrong decisions."

In his testimony at the congressional hearing, Horn strongly denied he was aware of the emissions violations and use of illegal software, and attributed the practice to a “couple of software engineers who put this in for whatever reason.”

Sales suffer

Horn became CEO based at VW's U.S. headquarters in Herndon, Va., following the resignation of his predecessor, Jonathan Browning who abruptly resigned after the VW brand's U.S. sales fell in 2013.

Volume fell despite an aggressive plan announced in 2008 by VW to triple U.S. sales in 10 years.

Since the diesel emissions violations broke, the VW brand has seen U.S. sales skid further. They dropped 4.8 percent to 349,440 in 2015 amid record industry volume and are off 14 percent this year while the overall market continues to grow.

U.S. incentive spending at the VW brand has surged 53 percent, or $1,367, this year to $3,934 per vehicle, according to estimates from Autodata Corp.

Financial aid

In the weeks after the crisis broke open, Horn deployed several financial tools to help dealers financially amid a freeze on diesel vehicles that accounted for more than 20 percent of the brand’s U.S. sales prior to the scandal.

Among them were lump sum payments wired to dealers and an easing of requirements to achieve monthly dealer cash bonuses.

He also lobbied hard for the $1,000 in cash and dealership credit for owners of the affected diesels that VW launched last November, a move met with “much resistance from Volkswagen AG,” according to the dealer council.

Horn’s candor also occasionally led to trouble for the executive. In January 2015, Horn told reporters that another 100 VW dealerships were to be added in the United States over the years to come. The prospect of additional rooftops when many dealers were struggling with new car sales and profitability led to a dealer outcry.

Reuters contributed to this report.