Crain News Service staff and wire reports
MUNICH (Sept. 21, 2015) — Volkswagen A.G. CEO Martin Winterkorn may face a leadership challenge after it was disclosed that the auto maker cheated on U.S. air pollution tests for diesel cars, analysts said.
VW faces fines of up to $18 billion and a backlash from consumers in the U.S. after the company admitted that software it designed for VW brand and Audi diesel cars gave false emissions data.
Volkswagen shares plunged as much as 23 percent to 125.40 euros in Frankfurt on Sept. 21, extending the stock's slump for the year to 31 percent. The drop wiped out about 15.4 billion euros ($17.4 billion) in value.
Arndt Ellinghorst, a London-based analyst for Evercore ISI, called the move “worthy of a back-street garage looking to get a used car through a mandated vehicle inspection.” The issue may help to catalyze further management changes at VW, he said.
Mr. Winterkorn, whose contract renewal is scheduled for a supervisory board vote on Sept. 25, now faces a serious challenge to his leadership, Mr. Ellinghorst said in an investors note Sept. 21.
Analysts at Bernstein said the issue is a serious setback for VW. “This is not your usual recall issue, an error in calibration or even a serious safety flaw. There is no way to put an optimistic spin on this - this is really serious.”
Trying to pin the blame on rogue engineers probably will not appease U.S. regulators, said Bernstein analyst Max Warburton. The best-case scenario is a multibillion-dollar fine, damage to its diesel market share and “pariah status in the U.S. with government, and possibly consumers,” he said.
Ferdinand Dudenhoeffer, director of the Center for Automotive Research at the University of Duisburg-Essen, said Mr. Winterkorn should resign. Mr. Winterkorn should have known about the manipulation in his role of head of VW's R&D — or, if he didn't, it shows that he does not have the auto maker under control, Mr. Dudenhoeffer told a German newspaper. Either way, Mr. Winterkorn's role as CEO is no longer tenable, the academic said.