VW Veteran Tapped to Be North America Boss Quits

By Georgina Prodhan and Jan Schwartz

FRANKFURT and HAMBURG, Germany -- The man Volkswagen (VLKAY) tapped less than three weeks ago to head its North American business resigned Wednesday, dealing a blow to the German carmaker's efforts to recover from a scandal over its rigging of U.S. diesel emissions tests.

News of the resignation of company veteran Winfried Vahland came as Germany's Spiegel magazine reported that at least 30 Volkswagen managers were involved in the test cheating. VW said the figure was without any basis.

Last week, the head of Volkswagen's U.S. business, Michael Horn, said he thought only "a couple of software engineers" were responsible.

%VIRTUAL-pullquote-VW is facing massive challenges and a completely new start.%"Vahland was a good manager," said London-based analyst Arndt Ellinghorst at banking advisory firm Evercore ISI. "VW is facing massive challenges and a completely new start."

Europe's largest carmaker is in crisis after admitting last month it installed software in diesel vehicles to deceive U.S. regulators about their true level of toxic emissions.

The scandal has wiped about a quarter off Volkswagen's market value, forced out its long-time chief executive and rocked both the global car industry and the German economy.

On Tuesday, the company said it would cut investment plans at its core VW division by 1 billion euros ($1.1 billion) a year through 2019 and speed up savings as it braces for a clean-up bill which some analysts believe could reach 35 billion euros to cover regulatory fines, vehicle recall costs and lawsuits.

The premium Audi division, source of about 40 percent of group profit, will also cut spending in the coming years, two Volkswagen sources told Reuters on Wednesday.

Audi managers are reviewing the brand's 2015-19 budget of 24 billion euros and are due to outline possible cost cuts to its supervisory board by its next meeting on Dec. 3, they added.

Differences of Opinion

Vahland was at Volkswagen for more than 25 years, leading its rapid expansion in China before heading Czech division Skoda.

Skoda said he was leaving of his own choice because of unspecified differences of opinion over the company's organization of its North American business, confirming what sources close to the matter earlier told Reuters.

%VIRTUAL-WSSCourseInline-947%"This decision is expressly not connected to the current events around the diesel topic," a Skoda statement said.

German weekly Auto Bild earlier reported Vahland's departure, noting he was passed over for the top job at Volkswagen after Chief Executive Officer Martin Winterkorn resigned Sept. 23 because of the scandal.

Volkswagen had appointed 58-year-old Vahland to join the management of the VW brand on Nov. 1 as head of its operations in the United States, Mexico and Canada as part of a broader reshuffle that led to Porsche CEO Matthias Mueller taking the helm of the group.

Sources had told Reuters before Vahland's appointment that he was also the favorite to get a new management board position to oversee the group's North American operations, which were struggling even before the test rigging scandal.

Investigations

Volkswagen is under pressure to identify those responsible for the wrongdoing and fix up to 11 million affected diesel vehicles. It has been criticized by politicians, investors and consumers for the time it is taking to produce answers.

Spiegel, citing preliminary results of investigations by law firm Jones Day and Volkswagen itself, said the dozens of managers implicated in test rigging would be suspended.

It also cited a person familiar with the matter as saying the circle of those involved or who knew about the cheating could widen further.

New CEO Mueller is expected to speak to top management Thursday about the current state of the investigations, steps to refit affected models and possible spending cuts.

As part of its response to the crisis, the company announced plans on Tuesday to step up development of electric and hybrid vehicles.

German Economy Minister Sigmar Gabriel warned Wednesday against condemning diesel technology as a whole due to the problems at Volkswagen, but said Germany needed to do better in switching to alternative engines.

The car industry employs more than 750,000 people in Germany and is a major source of export income. Diesel vehicles are particularly important in Europe, accounting for about a half of sales compared with just a small fraction in the United States.

Gabriel said he was in favor of incentives to reduce the price difference between electric and conventional vehicles. However, the German finance ministry said it saw such incentives as "problematic."