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New Volkswagen Chief on Regaining Trust

Matthias Müller, the new chief executive of Volkswagen, promised on Friday that he would work to regain the trust of employees, customers, business partners and the industry.

By REUTERS on Publish Date September 25, 2015. Photo by Alexander Koerner/Getty Images. Watch in Times Video »

FRANKFURT — Volkswagen on Friday tried to move beyond the emissions cheating scandal that has threatened to cripple it, naming Matthias Müller, the head of the company’s Porsche unit, as chief executive.

He replaces Martin Winterkorn, who resigned on Wednesday and took responsibility for the fraud but said he was not personally involved.

“The same thing must never happen again,” Mr. Müller said Friday in the company’s headquarters in Wolfsburg, Germany.

He promised to overhaul the company’s management structure. Volkswagen also said on Friday that it would revamp itself to give more independence to individual vehicle brands, addressing criticism that decision-making had been too centralized in Wolfsburg and too slow.

For the last week, Volkswagen, one of the global auto industry’s biggest corporations, has been dealing with the fallout of revelations that millions of its vehicles were enabled with software meant to deliberately trick diesel air-quality tests.

The deception enabled Volkswagen diesel cars to pass air-quality tests in a lab setting but emit pollutants up to 40 times the allowable United States limits when actually driven, a ruse that enabled the cars to have more power and better fuel economy than they would have been able to achieve. Volkswagen has admitted that the devices exist in 11 million cars worldwide.

Continue reading the main story Graphic How Volkswagen Got Away With Diesel Deception Volkswagen could have saved fuel or improved performance by allowing more pollutants to pass through its cars’ exhaust systems, researchers said. Volkswagen Names Matthias Müller, an Insider, as Chief Executive

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Volkswagen said employees had been suspended in connection with the scandal, but did not name them. The company said it would hire an American law firm, which it did not identify, to conduct an internal investigation of the emissions deception. Berthold Huber, a labor leader who is the acting chairman of the company’s supervisory board, attributed the deceit to “developers and technicians” in the company’s motor development operations. The company indicated that further dismissals were likely to follow.

In the United States on Friday, federal regulators announced a rigorous new series of road tests to determine whether other automakers had used software to cheat on emissions testing.

Officials of the Environmental Protection Agency said carmakers selling vehicles in the United States were informed that the spot checks were meant to find so-called defeat devices like those used by Volkswagen.

Agency officials did not say whether they suspected any specific carmaker of installing the illegal devices, but vowed to inspect a wide range of new and used models.

“We aren’t going to tell them what these tests are, and they don’t need to know,” said Christopher Grundler, head of the agency’s office of transportation and air quality.

The E.P.A. defended its standard laboratory emissions tests, even as it announced the new unspecified road tests. Mr. Grundler said the agency’s standard tests, which every car must pass in order to be sold, were robust and responsible for substantial improvements in air quality.

Janet McCabe, the agency’s acting assistant administrator, said the level of standardized testing was not at fault for Volkswagen’s ability to skew emissions performance with illegal equipment, blaming the automaker’s actions.

Ms. McCabe said the agency’s investigation into Volkswagen action was continuing. The Justice Department is also investigating the company, as are a number of state attorneys general.

The government can assign penalties of $37,500 for each vehicle that fraudulently passed the tests. Last week, officials told Volkswagen to recall 482,000 vehicles, bringing the potential fines to about $18 billion, though analysts expect the actual penalty to be smaller.

The vehicles in violation in the United States are 2009-2015 models of the Volkswagen Jetta, Beetle and Golf, as well as the Audi A3. Also included were 2014-2015 models of the Volkswagen Passat.

Mr. Grundler said it appeared that the 2015 models would be fixed more quickly than the older vehicles, but he did not specify a timetable. He said consumers would need to wait for an official recall notice from Volkswagen for repairs. Until then, he said, “these cars are safe and legal to drive.”

Also on Friday, the German government said it had identified 2.8 million Volkswagen vehicles in that country that were equipped with the illegal software, including cars with several different engines as well as some commercial vehicles.

As the investigations into Volkswagen’s deception multiply and broaden, the pressure rises on Mr. Müller to both cooperate with regulators and restore the carmaker’s battered reputation.

Since Mr. Müller, 62, moved into the top job at Porsche in 2010, after its takeover by Volkswagen, he has won praise for increasing sales and profits at the sports car maker while preserving its cachet among aficionados. Many had worried that the merger with Volkswagen would dilute the purity of the Porsche brand.

Volkswagen Names Matthias Müller, an Insider, as Chief Executive
The German government said it had identified 2.8 million Volkswagen vehicles in that country that were equipped with software that fooled emissions tests, including some commercial vehicles.Credit Francois Nascimbeni/Agence France-Presse — Getty Images

But managing the far-flung Volkswagen empire is a challenge of a different magnitude, even without the emissions scandal. Volkswagen sales in China, the company’s biggest single market, have been slowing, and they have been plummeting in Brazil, another important country. The company’s market share in the European Union slipped to 26.5 percent in August from 28.1 percent a year earlier, though Volkswagen still has more than twice the share of any competitor.

The company’s management has been criticized for being unwieldy, and on Friday it said it would create a new organization for North America, combining the Mexican, Canadian and United States markets. Winfried Vahland, who has been in charge of the company’s Skoda unit, which is based in the Czech Republic and makes lower-price vehicles, will head the new regional organization.

However, Michael Horn will remain as chief executive of the Volkswagen Group of America, the company said. Despite the emissions scandal, Volkswagen dealers in the United States in recent days expressed strong support for Mr. Horn and urged the company to keep him in place.

Volkswagen also said that Christian Klingler, its top sales and marketing executive, would leave the company but that his departure reflected “differences with regard to business strategy” and was “not related to recent events.”

Members of Volkswagen’s supervisory board read statements Friday and insisted that they would not take questions. But Mr. Müller, after speaking of a new beginning for the board, making it more flexible, found one question important enough to answer: Had he been aware of the effort to design and install the manipulative software?

“I definitively knew nothing about it,” he said, before rising quickly with the others and leaving the room.

Volkswagen’s structure is unlike any other automaker’s. More than half the shares are owned by members of the Porsche family, who have feuded among themselves, resulting in power struggles that have haunted the company for decades.

“The Porsche and Piëch families stand behind Volkswagen, even in these difficult times,” said Wolfgang Porsche, a member of the Volkswagen supervisory board who represents the interests of the family, referring to the branch of the family that includes Ferdinand Piëch, the former Volkswagen chairman.

Mr. Piëch, a dominant figure in Volkswagen for decades, resigned as chairman in April after a power struggle with Mr. Winterkorn. Wolfgang Porsche, Mr. Piëch’s cousin, backed Mr. Winterkorn.

Twenty percent of the company is owned by the state of Lower Saxony, which has veto power over major decisions. The state government, along with Volkswagen’s powerful worker representatives, has an interest in maximizing employment, sometimes at the expense of profit. The sovereign wealth fund of Qatar owns 17 percent. Outside shareholders — the investing public — hold 12 percent and are essentially an afterthought for management.

“Volkswagen has no corporate governance,” said Ferdinand Dudenhöffer, a professor at the University of Duisburg-Essen who follows the auto industry. “There is no clear border between oversight and management. It has to be made into a normal company.”

Mr. Müller, who studied machine tool making and later information technology, has worked at Volkswagen since 1977, primarily in the company’s Audi unit, based in the Bavarian city of Ingolstadt. He has an advantage of understanding the company well, but some corporate governance experts say Volkswagen should hire an outsider with no stake in the existing order.

“The research shows that when there’s a perception of a need for change on a large scale, outsiders do better,” said Jo-Ellen Pozner, an assistant professor at the Haas School of Business at the University of California, Berkeley. “It just sends a more credible signal.”

Mr. Müller said he was determined that the company would move forward.

“We will overcome this crisis,” Mr. Müller said. “We will emerge a stronger company.”

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