VW CEO: Martin Winterkorn to resign

Written by By Nick Whigham, CNN

The way Volkswagen operates has come under intense scrutiny following the scandal surrounding its diesel emissions testing procedures.

Now that fallout appears to be taking a toll on the company’s leadership.

The German carmaker’s top management announced on Wednesday that long-time CEO Martin Winterkorn will step down following an investigation into allegations of corporate misconduct.

But Volkswagen Group CEO Herbert Diess will remain in the top job, with “a reduced operational role,” during the company’s hunt for a new chief executive, said Volkswagen in a press release on Wednesday.

“The allegations are grave and relate to important decisions of the VW Group that were being implemented at the time. Volkswagen Group takes the allegations very seriously,” Diess said in a statement.

Diess, who was named Volkswagen’s chief in January 2016, will remain in charge of the company’s automotive division, in addition to overseeing the company’s ethical and legal issues.

The CEO changes will apply to the other divisions of the Volkswagen Group.

Chairman Hans Dieter Poetsch, who has held the post since 2011, will replace Winterkorn.

Winterkorn announced his decision to step down in a note to company employees on Wednesday, after a damning report detailing the company’s misbehavior led to months of investigations.

“It would have been appropriate for me to ensure that the organization had enough visibility and clarity on the situation before I left office,” Winterkorn said in the statement.

Winterkorn’s resignation follows a March report that his office was monitoring hundreds of internal communications, including meetings and emails from executives. According to Reuters, Volkswagen sent investigators to examine Winterkorn’s daily routine.

Disclosure after the magazine Der Spiegel published the story forced Winterkorn to acknowledge he knew about the scope of the diesel cheating. He was already facing calls to resign following the report.

In addition to Winterkorn, three other high-ranking managers are now out of a job at Volkswagen:

— CEO of the Audi group, Rupert Stadler, is out after being placed under investigation for suspected violation of import law and perjury.

— Michael Horn, head of the VW brand in the United States, who has been a vocal proponent of VW’s efforts to mend its image, will also leave the company.

— Herbert Diess, who was earlier derided as weak in the wake of the diesel scandal, seems to have won over the company’s board with his humility and connection to its customers. The company can now speak of a credible European automotive leader.

“Herbert Diess represents the proven strength and integrity of the Volkswagen brand with his proven ideas for transforming the automotive industry. I see him as a key player in managing the group and driving Volkswagen forward,” Poetsch said in Wednesday’s statement.

Volkswagen is attempting to come to terms with the scandal, which has wiped nearly $40 billion off its market value and dealt a severe blow to its credibility in the U.S.

Earlier this month, the company reached a $14.7 billion settlement with the U.S. Justice Department and state of California over charges that the company installed software in its diesel vehicles to cheat on emissions tests.

Some 482,000 U.S. vehicles were affected by the software. The automaker has said it is too early to estimate the financial impact of the settlement and will determine how much it should pay owners of cars affected by the emissions scandal.

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