Coverage: Volkswagen’s U.S. CEO Michael Horn is out

Michael Horn was Volkswagen’s public face in the early days after its highly-publicized emissions scandal broke, but now the German automaker’s top U.S. manager is out.

The company disclosed in a filing Wednesday that Horn left the company and will be replaced by Hinrich Woebcken.

John Stoll and Mike Spector of The Wall Street Journal had the day’s news:

Volkswagen AG’s top U.S. manager has left the company six months after the auto maker became embroiled in an emissions-testing scandal that has cost other top executives their jobs and left a stain on the German giant’s reputation.

The departure of Michael Horn, disclosed by the auto maker on Wednesday, comes as Volkswagen-brand car sales have plummeted in the U.S. and the Justice Department and German prosecutors are probing the auto maker.

The 54-year-old executive was well-liked by Volkswagen dealers for his frankness and has been the embattled company’s chief spokesman in the U.S. as it worked to regain trust with car buyers and dealers.

In September, the Environmental Protection Agency said Volkswagen for years cheated on diesel-emissions tests, allowing the company to claim that many of the vehicles it sold in the U.S. were cleaner than they really were. In the months that followed, the auto maker has faced criticism from lawmakers and government officials for not moving fast enough to compose a comprehensive plan to remedy the issue.

Earlier this year, Volkswagen appointed Hinrich Woebcken to a new position as head of its North American operations, and chairman of its U.S. business. He will take Mr. Horn’s place at Volkswagen of America on an interim basis.

Jad Mouawad of The New York Times explained how Horn’s departure has left many dealers in doubt:

After being named to the top spot in the United States two years ago, Mr. Horn played a crucial role in rebuilding Volkswagen’s relationship with its dealership network, gaining the support of the sales force on the ground. Car dealers in the United States had long complained about the lack of support they received from the company’s managers in Germany.

The fraud further tested the relationship, with Volkswagen admitting that 11 million diesel cars worldwide contained a so-called cheat device that effectively lowered emissions. Mr. Horn tried to soothe American dealers, offering to reimburse them for the cost of holding onto diesel cars and providing extra incentives for selling gasoline-powered vehicles.

Now, dealers are wondering about the direction of management. Alan Brown, who is the chairman of the Volkswagen National Dealer Advisory Council and runs two Volkswagen dealerships in Texas, said Mr. Horn’s departure was a serious blow.

“We are troubled watching the mismanagement of this scandal from Germany, and how it may impact the ultimate decisions by the authorities in the United States,” the Volkswagen dealers association said in a statement. “This change in management can only serve to put the company at more risk, not less.”

The departure of Mr. Horn is the latest in a string of executive changes at Volkswagen since the scandal. The company’s chief executive resigned last year. A newly named head of North American operations left shortly after that group was reorganized.

The departure of Mr. Horn, which the company said was reached by “mutual agreement,” is effective immediately. The company offered few details, except to say that Mr. Horn was leaving to pursue other opportunities.

Mr. Horn will be replaced by Hinrich J. Woebcken, who was recently named head of the North American region and chairman of Volkswagen Group of America.

“The Volkswagen leadership hammer continues to fall,” said Akshay Anand, an analyst at Kelley Blue Book, who noted that Mr. Horn had many allies among Volkswagen’s dealers in the United States. “It will be interesting to see if Woebcken can continue that, and more importantly, if he can help VW navigate through its crisis.”

The Economic Times detailed the German automaker’s recent troubles following its highly-publicized emissions scandal:

“People know this scandal was rooted in Germany, which is why this is so surprising,” Rebecca Lindland, senior analyst for auto researcher Kelley Blue Book, told Bloomberg News.

“In terms of scapegoats, there are other goats out there who would have been better.”

VW, which until recently had ambitions to become the world’s biggest carmaker, is battling to resolve its deepest-ever crisis sparked by revelations that it installed emissions-cheating software into 11 million diesel engines worldwide.

The software, known as a “defeat device”, limits the output of toxic nitrogen oxides to US legal limits during emissions test by regulators.

But when the vehicles are in actual use, the software allows them to spew poisonous gases at up to 40 times the permitted levels, giving the vehicle better acceleration and fuel economy.

Nitrogen oxide is a pollutant associated with respiratory problems and defeat devices are prohibited in the United States, where the VW scam was originally exposed, as well as in other countries.

On top of still unquantifiable regulatory fines in a range of countries, VW is facing a slew of legal suits, notably in the United States and Germany, from angry car owners, as well as from shareholders seeking damages for the massive loss in the value of their shares since September.

This week, German prosecutors said they had broadened their investigation into the cheating from six to 17 suspects at Volkswagen. No board member are among the suspects, however.

French prosecutors said they, too, have opened an investigation into “serious fraud” at the automobile manufacturer.

Volkswagen’s former chief executive Martin Winterkorn resigned shortly after the scandal broke last year, protesting his innocence. He was replaced by Matthias Mueller, head of the group’s luxury sports car brand, Porsche.

Volkswagen has since revealed that Winterkorn was sent a memo in May 2014 highlighting some of the diesel engine irregularities that have since come to light.