FRANKFURT -- Volkswagen AG is preparing to name Bram Schot as interim leader of its Audi unit, according a person familiar with the matter, following the arrest of the luxury brand’s longtime chief Rupert Stadler over his role in VW’s diesel-emissions cheating.
The decision is expected soon, the person said, who asked not to be named because the deliberations aren’t public. Board members, caught by surprise by Stadler’s arrest, were debating who should oversee Audi at a meeting on Monday before making a final decision. Stadler was arrested earlier at his home in Ingolstadt, Germany, making him the highest-profile manager to face detention in the probe that’s engulfed the carmaker and parent Volkswagen for almost three years.
Stadler's employment status was not immediately clear on Monday, although Bloomberg reported earlier that he was being suspended.
With Schot, the head of sales and marketing at Audi, VW would be going with an executive so far untainted by the emissions scandal. The 56-year-old joined VW from Daimler AG in 2011, holding positions at the commercial-vehicles unit, and only joined Audi’s management board last year.
Stadler’s arrest is the first among the automaker’s top executives. It raises new questions about a Volkswagen response to its biggest crisis that’s alternated between stonewalling and cooperation, while protecting its most senior managers.
Munich prosecutors sought to take Stadler, 55, into custody because of risk he may tamper with evidence, they said in a statement. Prosecutors acted after wiretapping his phone, Sueddeutsche Zeitung reported. Last week, authorities raided his house and named him a suspect in their probe of fraud and falsifying public documents in relation to selling diesel cars in Europe.
Stadler is willing to be questioned later this week and his lawyers won’t challenge his arrest for now, prosecutor Stephan Necknig said. Investigators had indications Stadler, who hasn’t been charged, may influence witnesses in the probe, he said. Pre-trial detention can last as long as three months and can be extended while cooperative suspects usually leave custody much faster.
The arrest, which comes days after Volkswagen agreed to pay a 1 billion-euro ($1.2 billion) fine imposed by German prosecutors, spells more trouble at the top of Volkswagen’s biggest earnings center. Stadler oversees a division that provides technology including engines to a number of the group’s brands -- including Porsche.
Even if Stadler wasn’t directly involved in the diesel-engine manipulation, there has been an obvious lack of oversight at Audi that stretched over years, Juergen Pieper, a Frankfurt-based analyst at Metzler Bank, said by phone.
Stadler has led Audi since 2007 and on VW’s management board since 2010. The company’s controlling Porsche and Piech families had so far backed him despite a constant drumbeat of allegations ever since Audi got embroiled in the diesel scandal. Initially rejecting U.S. regulator claims it used illegal engine software, the carmaker has struggled to put an end to a drip-feed of negative diesel-related headlines.
Ulrich Weiss, a former top engineer at Audi’s engine development operation, told a German labor court last year Stadler had been aware of the illegal software earlier than he admitted. Weiss and Audi have since settled the legal dispute over his firing.
Stadler joined Volkswagen’s Audi unit in 1990, where he assisted the unit’s then-CEO Ferdinand Piech, the famed and feared later Volkswagen chairman. At Audi, he also worked alongside then-head of development Martin Winterkorn, who resigned as VW CEO days after the cheating scandal first erupted. The U.S. Justice Department in May issued a warrant for Winterkorn’s arrest.
VW still faces legal proceedings in 55 countries and investigations into stock-market manipulation in its home market. The company has earmarked more than 27 billion euros ($31.4 billion) for fines, buybacks and costs. Investors have accused the company of informing investors too late about the probe, a view the carmaker has contested.
Prosecutors in Munich, Stuttgart and Braunschweig are continuing their investigations of VW and its units. In April, Stuttgart authorities arrested a senior engine manager at the company’s luxury Porsche brand, after conducted raids at 10 sites as part of a long-running probe. Wolfgang Hatz, a former VW manager who joined Audi unit in 2001 and from 2007 to 2011 ran VW’s motor development, has been in custody in Munich since September. Giovanni Pamio, another Audi engineer, was arrested last year in Munich and released four month later after extensive questioning by prosecutors. The Munich probe now involves 20 people linked to Audi.
Two VW employees are currently serving prison terms in the U.S. James Liang, a veteran company engineer who pleaded guilty to conspiracy, was sentenced to 40 months in custody. Oliver Schmidt, VW’s compliance liaison with American regulators, pleaded guilty in August to one count of conspiracy to defraud the U.S. He received a seven-year sentence.
“The ongoing public bickering continues to undermine shareholder, customer and employee confidence,” Evercore ISI analyst Arndt Ellinghorst wrote in a note. “Almost three years after the diesel scandal broke, it takes the police to take action against the Audi CEO.”
The U.S. filed criminal charges against former VW CEO Martin Winterkorn in May, but he is unlikely to face U.S. authorities because Germany does not extradite its nationals to countries outside the European Union.
The Munich prosecutors said Stadler's arrest was not made at the behest of U.S. authorities. The executive was arrested at his home in Ingolstadt, in the early hours on Monday, they said.
The Munich public prosecutor's office said last week it was investigating 20 suspects, and that it had searched the apartment of Stadler and one other current board member.
The second suspect is Bernd Martens, Audi's head of purchasing, according to a person familiar with the investigation who declined to be identified because prosecutors hadn't disclosed the name, Reuters reported. Martens led a diesel task force at Audi, which was set up to coordinate the handling of the crisis with the parent company.
In the U.S., Audi sales have been on a hot streak for more than eight years under the watch of Stadler, who became brand head in 2007. In May, the brand recorded its 103rd straight month of year-over-year sales increases.
Reuters and Automotive News Europe contributed to this report.