FRANKFURT (Reuters) – Volkswagen (VOWG_p.DE) was holding crisis talks on Monday to find a stand-in boss for its Audi brand, a source familiar with the discussions said, after German authorities arrested Audi CEO Rupert Stadler as part of a probe into emissions test cheating.
Stadler is the most senior company official to be detained so far since Volkswagen (VW) admitted in September 2015 to using illegal software to rig U.S. emissions tests on diesel engines.
Munich prosecutors, who widened their probe into Audi earlier this month, said Stadler was being held due to fears he might hinder their investigation into the scandal, plunging VW into a leadership crisis.
“We need to find a solution for Audi’s leadership for the time when he is not here,” the source familiar with the talks said about Stadler’s position. “We will comment on this later.”
VW and Audi directors were discussing the leadership crisis in separate meetings on Monday, with one source saying Dutchman Bram Schot was the front runner to become interim Audi chief.
Germany’s Sueddeutsche Zeitung newspaper said VW’s supervisory board had already picked Schot for the job and only needed the formal approval of Audi’s directors. VW denied any such appointment had been made.
VW has set aside around $30 billion to cover fines, vehicle refits and lawsuits since its “dieselgate” scandal broke, and has announced plans to spend billions more on a shift to electric vehicles as it seeks to rebuild its reputation.
Whereas group CEO Martin Winterkorn resigned in the days after the cheating was disclosed, Stadler has remained in post and was this year promoted by new VW boss Herbert Diess in an overhaul aimed at speeding up the group’s reforms.
“His arrest is another low point in VW’s diesel saga,” said Evercore ISI analysts, who have criticized the group for a slow pace of reform. “Almost three years after the diesel scandal broke, it takes police to take action against the Audi CEO.”
The United States filed criminal charges against 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 the move against Stadler was not made at the behest of U.S. authorities. The 55-year-old was arrested at his home in Ingolstadt in the early hours on Monday, they said.
“The arrest warrant was made because of a risk that evidence might be suppressed,” Stephan Necknig, a spokesman for the Munich prosecutor’s office, told Reuters Television.
“During a search last week there were signs that the accused may tamper with evidence. To influence other suspects or witnesses, or people who could provide information to the investigating authorities,” he added.
Audi and VW said Stadler was presumed innocent unless proved otherwise. Stadler himself was not immediately available for comment.
At 1409 GMT, VW shares were down 3 percent at 156.08 euros, one of the biggest falls by a European blue-chip stock .FTEU3.
UNDER FIRE
Stadler has been under fire since Audi admitted in November 2015 – two months after parent VW – that it also installed illegal “defeat device” software to cheat U.S. emissions tests.
Munich prosecutors are investigating whether Stadler acted swiftly enough to stop deliveries of manipulated Audi models in Europe once emissions problems had emerged, a person familiar with the matter has told Reuters.
Stadler has held onto his post mainly thanks to the backing of members of VW’s controlling Porsche-Piech families. Before becoming Audi CEO in 2007, Stadler worked as chief of staff to VW’s former chairman Ferdinand Piech.
Earlier this month, Munich prosecutors widened their probe at Audi to include Stadler and another member of Audi’s top management, investigating them for suspected fraud and false advertising.
Stadler’s arrest will raise tensions on VW’s supervisory board, putting at risk a fragile truce between management, labor representatives and board members from the carmaker’s home region of Lower Saxony.
Most of VW’s emissions problems have been in the United States, where a total of nine people have been charged and two former VW executives have pleaded guilty and been sentenced to prison terms.
But investigations are continuing elsewhere. Last week, German prosecutors fined VW 1 billion euros ($1.2 billion) over the scandal.
($1 = 0.8608 euros)
By Edward Taylor, Jan Schwartz