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September 26, 2015

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VW said to rig emission tests on 2.8m diesel cars in Germany

VOLKSWAGEN rigged emission tests on about 2.8 million diesel vehicles in Germany, the country’s transport minister said yesterday, nearly six times as many as it has admitted to falsifying in the United States.

His comments, pointing to cheating on a bigger scale than previously thought, deepened the crisis at the world’s largest automaker as its supervisory board held a crucial meeting.

The board is widely expected to name Matthias Mueller, the head of its Porsche sports-car division, as chief executive to replace Martin Winterkorn, who quit on Wednesday, and at least four senior executives are expected to be purged.

Shares in the German company, which had started to steady after sharp falls earlier this week, closed 4.32 percent down yesterday after Bloomberg News also reported that executives in Germany controlled aspects of the manipulated US tests, citing three people familiar with the US business.

VW is under heavy pressure to show it can get to grips with the biggest business-related scandal in its 78-year history.

Mueller, 62, would represent part of the fresh start that Winterkorn said was needed when he stepped down.

The board will also dismiss the head of its US business, the top engineers of its luxury Audi and Porsche brands and the head of brand development at its VW division, sources added, aiming to show it is acting decisively to end the crisis.

VW shares have plunged as much as 40 percent, wiping tens of billions of euros off its market value, since US regulators said on September 18 that it had admitted to programing diesel cars to detect when they were being tested and alter the running of their engines to conceal their true emissions.

The scandal keeps growing. German transport minister Alexander Dobrindt said on Thursday that VW had also cheated tests in Europe, where its sales are much higher, and yesterday put the number of affected vehicles in Germany at 2.8 million.

Regulators and prosecutors across the world are investigating the scandal.

The wider car market has been rocked, with manufacturers fearing a drop in sales of diesel cars and tighter regulations, while customers and motor dealers are furious that VW has yet to say whether it will have to recall any cars.

“VW needs to be very open about what has happened, how it was possible that this could happen to make sure that this never happens again in the future,” said a leading VW shareholder, underlining the importance of the board meeting.

“These are priorities that should override all other considerations at the moment.”

The task facing Mueller, if his selection is confirmed, is huge. The company said on Tuesday that 11 million vehicles worldwide were fitted with the software that allowed it to cheat US tests, while adding it was not turned on in the bulk of them.

Analysts hoped that yesterday it may at least say which models and construction years are affected, and whether cars will need to be refitted.

They also expect it to announce a full investigation of the scandal, with German newspaper Handelsblatt saying it planned to hire US law firm Jones Day to lead a no holds barred inquiry, and to give the outlines of a new management structure likely to be less centralized, but with a clearer system of checks.

VW has long been seen as a symbol of German industrial prowess, and the auto industry is one of the country’s major employers and a key source of export revenue.

Earlier this month, VW delivered a presentation to investors at the annual Frankfurt motor show entitled “Stability in Volatile Times.”

Now Chancellor Angela Merkel is urging it to act quickly to restore confidence in the VW name.


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