Coverage: Audi’s CEO arrested in diesel scandal

Volkswagen began work to find a stand-in boss for its Audi brand after German authorities arrested current Audi Chief Executive Rupert Stadler as part of a probe into emissions test cheating.

Edward Taylor and Jan Schwartz of Reuters had the news:

Stadler’s arrest on Monday threw Volkswagen (VW) into turmoil as it struggles to recover from cheating revelations, which emerged after regulators blew the whistle in September 2015 on the carmaker’s use of illegal software.

The directors of Audi and Volkswagen discussed how to run its more profitable division without Stadler, but failed to come to a conclusion, the carmaker said late on Monday.

“The supervisory boards of VW and Audi have not yet reached a decision and continue to assess the situation,” a spokesman for VW said.

The arrest has kicked off a new debate over VW’s governance which could raise tensions on its supervisory board, putting at risk a fragile truce between management, VW’s controlling Piech and Porsche families, as well as representatives from labor and the region of Lower Saxony.

VW has for years said only lower-level managers knew of the emissions cheating, but U.S. authorities filed criminal charges against former VW boss Martin Winterkorn earlier this year, and Munich prosecutors widened their probe into Audi this month.

Alanna Petroff of CNNMoney.com reported that Volkswagen was recently fined by German authorities:

The arrest comes just days after Germany imposed a €1 billion ($1.2 billion) penalty on Volkswagen for rigging diesel engine emissions worldwide.

Volkswagen has admitted that it rigged millions of diesel engines to cheat on emissions tests.

Diesel cars from Volkswagen and its Audi subsidiary cheated on clean air rules with software that made emissions look less toxic than they actually were.

The scandal sent its share price plunging, and trashed confidence among consumer and regulators in diesel technology. The episode has already cost Volkswagen over $30 billion in recalls, legal penalties and settlements.

Jack Ewing of The New York Times reported that it’s rare for Germany to arrest a CEO:

It is almost unheard-of for a German judge to jail a corporate executive of Mr. Stadler’s rank. The decision indicates the judge was convinced there was a risk that Mr. Stadler would flee or obstruct the investigation, which prosecutors have said involves about 70 suspects.

Even then, Volkswagen’s reaction has been hesitant. The company’s supervisory board, which oversees top management, met on Monday and was expected to appoint an interim replacement for Mr. Stadler, leaving open the possibility that he would return at some point. However, the board did not make a decision.

Volkswagen’s reluctance to take action against Mr. Stadler is perhaps the starkest example yet of the company’s approach to the emissions scandal more than two and a half years after it erupted.

Time and again, the company has clung to top executives who, if not directly implicated, held positions of responsibility while an enormous emissions cheating scheme was taking place under their noses. In the case of Mr. Stadler, himself a member of Volkswagen’s management board, the carmaker said he was innocent until proven guilty, granting a top executive much more benefit of the doubt than ordinary employees would typically receive.