Volkswagen crisis: chief executive Martin Winterkorn resigns - as it happened

Graeme Wearden (until 3.30) and Nick Fletcher

from on 2015-09-23 17:19 (#N9K5)

Winterkorn denies any wrongdoing but will leave in "the interests of the company"

6.19pm BST

And here's our latest story on the VW scandal and Winterkorn's decision to do the honourable thing:

Volkswagen has announced the resignation of its chief executive, Martin Winterkorn, and said the fallout from the diesel emissions test scandal would result in further executive scalps and a likely criminal investigation in Germany.

Winterkorn said on Wednesday he took full responsibility for the scandal, in which the company admitted that 11m cars were installed with a defeat device that reduced emissions under test conditions only, but he denied personal wrongdoing.

6.00pm BST

Here's our explanation of how the defeat device worked and how VW cheated in emissions tests:

5.51pm BST

This is not the first time Volkswagen has run foul of US authorities over pollution controls, CNBC is reporting:

Volkswagen has had a previous run-in with U.S. authorities for selling vehicles that used so-called "defeat devices" to disable pollution-control systems in four models of its vehicles produced in 1973.

News reports archived by the nonprofit Center for Auto Safety show the German automaker, then known as Volkswagenwerk AG, and its American subsidiary, Volkswagen of America, paid a $120,000 fine in March 1974 to settle a complaint filed by the Environmental Protection Agency over the use of so-called "defeat devices" that disabled certain pollution-control systems. The complaint said the use of the devices violated the U.S. Clean Air Act.

5.40pm BST

Don't question all diesel technology or the whole German motor industry because of the VW scandal, is the plea from the country's VDA auto industry association. Reuters reports:

The head of VDA warned on Wednesday against calling into question all diesel technology because of the crisis at Volkswagen.

"One shouldn't make the mistake of using this case where software was manipulated to produce better test results to call into question all diesel technology," VDA chief Matthias Wissmann said.

5.27pm BST

Here's the view of one of Volkswagen's biggest shareholders on the scandal. The BBC has spoken to AXA fund manager Gilles Guibout about Winterkorn's resignation and the accusations against the company:

There was no alternative - it is an attempt to keep the fire under control. He has tried to take all the responsibility but it is not easy to say if this will be enough.

[The allegations have] been a real shock. We are a long term shareholder and we put a lot of emphasis on management credibility. The fall in the share price was too big for us to sell - it would not be in our clients' interest to sell.

5.19pm BST

Volkswagen shares recovered some of the losses they have sustained since the emissions scandal broke at the start of the week. They closed 5.19% higher at a111.5, but the company has still lost around a26bn of value following the crisis.

Overall European markets have - mostly - regained some ground, helped by the rebound in VW and comments from European Central Bank president Mario Draghi that the bank was ready to adjust its QE programme if necessary in the light of economic circumstances. He told the European parliament:

The asset purchase programme has sufficient in-built flexibility. We will adjust its size, composition and duration as appropriate, if more monetary policy impulse should become necessary.

5.06pm BST

Volkswagen's supervisory board has admitted criminal charges could follow after the revelation of the emissions scandal, and it has called in the state prosecutor.

As mentioned earlier it plans to set up a task force to investigate what happened, with external advisors.

1. The Executive Committee takes this matter extremely seriously. The Executive Committee recognizes not only the economic damage caused, but also the loss of trust among many customers worldwide.

2. The Executive Committee agrees that these incidents need to be clarified with great conviction and that mistakes are corrected. At the same time, the Executive Committee is adamant that it will take the necessary decisive steps to ensure a credible new beginning.

4. Recommendations for new personnel will be presented at the upcoming meeting of the Supervisory Board this Friday.

5. The Executive Committee is expecting further personnel consequences in the next days. The internal Group investigations are continuing at a high tempo. All participants in these proceedings that has resulted in unmeasurable harm for Volkswagen, will be subject to the full consequences.

4.37pm BST

Martin Winterkorn had no choice but to go following the discovery of the emissions scandal, says Karl Brauer at auto industry analyst Kelley Blue Book:

With more than 20 years at Volkswagen AG, during which he rapidly rose through the ranks to lead the automaker, Winterkorn appeared ready to bask in the glory of seeing VW become the world's largest automaker.

But VW's intentional, widespread efforts to deceive regulators across the globe suggests a dark side to the company's growth. This activity has been going on for years, meaning Winterkorn either had full knowledge of the deception, and approved it, or he was negligent in uncovering and stopping it. Either situation reflects poorly on Winterkorn and his leadership skills, and given the tragic impact this scandal will have on VW, his resignation wasn't just likely, but necessary.

4.31pm BST

Volkswagen says it will create a task force with an external advisor to look into the emissions scandal.

Further heads are likely to roll after Martin Winterkorn's resignation, with more news expected after Friday's board meeting.

Volkswagen Says: Greatly Respect CEO Martin Winterkorn's Decision

Volkswagen Says: Expect Further Personnel Consequences In Coming Days

Volkswagen Says: To Discuss New Personnel Proposals On Friday

Volkswagen Says: Creating Task Force To Clear up Case

Volkswagen Says: Task Force Will Include External Advisor

4.23pm BST

No word either on any compensation for Winterkorn. Which if it happens is likely be be controversial, to say the least.

4.23pm BST

No news yet on a successor to Winterkorn, although reports on Tuesday suggested he could be replaced by Matthias Mi1/4ller, the current chief executive of Porsche. This was denied at the time.

4.16pm BST

Volkswagen shares have reacted favourably to the news of Winterkorn's departure, with investors perhaps sensing there could indeed now be a fresh start as he suggested.

Up around 5% before the news, they now stand 8.35% higher at a114.

4.14pm BST

The news of Winterkorn's resignation comes a day after he vowed to stay on and repair the damage from the emissions scandal which has rocked the company and the motor industry.

A meeting of the supervisory board today seems to have sealed his fate. It's hard to know which would have been worse: him knowing about the falsification of emission tests, or him not knowing.

Someone has to take the fall in situations like this...and the buck does often stop w/ the CEO... #Volkswagen

4.03pm BST

Here's the full statement from WInterkorn:

"I am shocked by the events of the past few days. Above all, I am stunned that misconduct on such a scale was possible in the Volkswagen Group.

As CEO I accept responsibility for the irregularities that have been found in diesel engines and have therefore requested the Supervisory Board to agree on terminating my function as CEO of the Volkswagen Group. I am doing this in the interests of the company even though I am not aware of any wrongdoing on my part.

4.01pm BST

VW chief executive Martin WInterkorn has resigned over the emissions scandal.

3.41pm BST

BREAKING NEWS

Volkswagen will reportedly hold a press event. shortly.

JUST IN: Volkswagen to hold news event momentarily; no other details provided.

3.36pm BST

More fallout from the VW scandal: platinum has dropped to a six and a half year low.

The metal is used in diesel catalysts to clean up emissions, but obviously with the VW crisis, there could be less demand in future for diesel cars. It fell as low as $925.3 an ounce - its lowest since January 2009 - before recovering to $930.5, down 0.6%.

3.23pm BST

Fitch does makes some serious points about Volkswagen's crisis, as it puts the company on rating watch negative - the first step to a downgrade.

It says the rating action

2.55pm BST

Quick out of the blocks as ever, rating agency Fitch has just concluded that it might cut Volkswagen's credit rating over this scandal.

JUST IN: Fitch places Volkswagen on credit watch negative.

Fitch picks up Saturday's newspaper https://t.co/onhwaIcTEd

2.50pm BST

Volkswagen could face one of the biggest legal claims from UK consumers ever, say lawyers.

Boz Michelowska, a partner and consumer goods expert at law firm Leigh Day, believes legal cases could be brought in Britain if VW vehicles here were able to bypass the European emissions tests.

"If it is shown that this piece of software defeated the European testing then Volkswagen would be in a very similar position as in the US and may well then have to call in their cars with all the resulting costs involved.

"This could well lead to one of the largest group claims ever in this country against Volkswagen for the way in which consumers may have been misled in relation to their vehicle."

UK lawyers say #Volkswagen scandal could see largest group claim in UK legal history http://t.co/fR50iq2B96 pic.twitter.com/mFuyIdabuG

2.17pm BST

Back in Germany, prosecutors have said they are conducting a preliminary investigation into Volkswagen.

Reuters has the details:

Prosecutors of the German state Niedersachsen said in a statement they were looking into an investigation against Volkswagen employees as they had received a number of criminal complaints from citizens.

2.05pm BST

Heads-up. Mario Draghi, president of the European Central Bank, is about to testify to MEPs at the European Parliament. Here's a livefeed.

Draghi is unlikely to touch on the Volkswagen scandal (alas), but may make some important points about the eurozone economy, and the prospect of further stimulus measures.

2.00pm BST

1.39pm BST

The damage to VW's market value this week is quite staggering:

VW's a22.6bn loss in market cap exceeds Renault's total market value (20bn) & almost matches Fiat Chrysler's & Peugeot combined (26.5bn)

1.07pm BST

Germany's financial watchdog, Bafin, is conducting a 'routine' investigation into the slump in Volkswagen's shares this week.

The probe will look into whether VW released market-sensitive information in a timely manner.

12.43pm BST

Back in Berlin, transport minister Alexander Dobrindt has denied knowing that German carmakers were rigging emission tests (as claimed earlier)

"I have made it very clear ... that the allegations of the Greens party are false and inappropriate.

"We are trying to clear up this case. Volkswagen has to win back confidence."

12.38pm BST

France's energy minister Segolene Royal has vowed that Paris will be "extremely thorough, extremely severe" line with Volkswagen.

She told reporters that it was unacceptable to sell vehicles whose environmental credentials were false:

The victims are workers whose situation has been made more precarious, consumers who were duped and also the state which pays subsidies for purchases of clean vehicles."

12.13pm BST

The Germany government is being dragged into the VW scandal, and faces accusations that it knew that carmakers could falsify emissions data.

It's emerged that the transport ministry mentioned the issue in July, in response to a question from the Green party.

In a written response to a question from the Green party, the German transport ministry said: "The federal government is aware of [defeat devices], which have the goal of [test] cycle detection."

The Greens asked if the ministry was aware of the deployment of defeat device software in new vehicles, and it replied: "We have no knowledge of this."

Berlin finds itself caught up in Volkswagen scandal https://t.co/d4Tlf6ROR9 via @FT

The government told us in July that it knew about this software that has been used in the USA, and they clearly knew that the software was widely in use.

The government worked together with the auto industry, not to ensure that the emissions levels were reduced, but so that the measuring system was set up in such a way that on paper the cars met the necessary standards.

11.56am BST

Nobody knows how bad this crisis could become, says Saxo Bank's head of equity strategy, Peter Garnry.

For a start, Volkswagen hasn't put aside enough money to cover the costs. Yesterday it announced a provision of a6.5bn, which is dwarfed by its potential fine from US regulators, which could hit $20bn.

Why should Volkswagen be the only one? If they were the only one who cheated on the emission data they would be standing out from the competition so much that everyone would be wondering, but they're not.

11.41am BST

11.17am BST

This scandal could have very serious consequences for the German city of Wolfsburg, which was created in the 1930s to build the Beetle.

Bloomberg reports:

'If you'd visualise traffic in and out of the city, it would look like a pulse and the heart is the VW plant,' cab driver Karsten Raabe says as he steers his Skoda by the sprawling complex, where hundreds of gleaming cars sit in parking lots and on the back of freight trains.

'Without VW, this city and the entire region would die. We'd become a European Detroit,' which declared the biggest US municipal bankruptcy in 2013.

Wolfsburg is #Volkswagen's home. People there now fear for the future http://t.co/ImJh2EEXiK pic.twitter.com/IS95Q2pCnR

10.48am BST

Some brave investors in Frankfurt are buying into Volkswagen.

This has pushed its share price up around 3% today to a109, a far cry from the a162 on Friday before the emissions bombshell landed.

Volkswagen shares *finally* go a again (though they've still lost 32% this week) http://t.co/m5SaEsuXKs pic.twitter.com/EpRhB0S2R5

10.20am BST

Martin Winterkorn should do the right thing and resign now, argues our finance editor Nils Pratley.

Either Winterkorn knew what was going on, or he should have done.

If he knew the company had installed software to cheat US emissions tests, the end of his business career will be the least of his problems. If he didn't know, he's failed to do his job properly. Either way, he should have resigned from a well-paid post he has held since 2007.

It's also astonishing that Volkswagen's supervisory board didn't insist on an immediate resignation. If this was a UK-listed company - a leading member of the FTSE 100 index - it is safe to say the chief executive would have received his marching orders on day one.

10.13am BST

The executive committee of Volkswagen's board is meeting now to discuss the crisis that has rocked Germany's largest carmarker, according to local reports.

#VW top brass meeting in undisclosed location in Wolfsburg right now, according to @dpa. Will CEO Martin Winterkorn survive?

9.48am BST

Volkswagen faces the prospect of a massive legal battle over the emissions-fixing scandal, as customers seek redress.

Several legal firms have already filed class action lawsuits. The latest is Clifford Law of Chicago, who argues that consumers who bought a VW car have been shortchanged.

A US law firm has begun a class action lawsuit against Volkswagen over the 'defeat devices' used to fool exhaust emissions tests.

Robert Clifford, partner at Chicago's Clifford Law, said the impact on consumers was 'massive' and that car buyers had not got what they paid for.

Volkswagen Hires Kirkland & Ellis in Pollution Controls Scandal http://t.co/T6MJ4brpfN via @business

9.30am BST

The Volkswagen crisis comes at a tricky time for Europe's industry, given China's slowdown.

New data released this morning shows that private sector growth across the eurozone dipped this month, with factory growth at a five-month low. More here.

9.13am BST

Australia's stock market has hit a two year-low, following the weak Chinese factory data released this morning:

Took over two years to get here but we're here.. Australia's ASX 200 closes below 5,000 level #Markets #China pic.twitter.com/qxXNpkr9i2

9.10am BST

Volkswagen shares are pretty volatile today. They're currently flat for the day, after plunging 10% at the open.

It's almost suspicious.....

Traders trying to write VW in shares this morning. Nailed the V http://t.co/VUd5jGur3r pic.twitter.com/g0XePopAbx

8.58am BST

"It's unusual for events in a single company to become a driver of global markets but that's what is happening now with Volkswagen".

So says Kit Juckes, senior strategist at French bank Socii(C)ti(C) Gi(C)ni(C)rale, adding:

The woes of the world's second-biggest car manufacturer are doing nothing for economic optimism or risk appetite and they are undermining the euro, against both dollar and yen.

8.55am BST

Over in Paris, shares in Renault and Peugeot have both fallen by over 5%:

Peugeot down 6.3% Renault by 5% - this is contagious!

8.50am BST

VW shares down 8.1% this morning, having fallen 35% in two days. Question: did anyone in the German govt know about the cheating scandal?

8.48am BST

Volkswagen's share price fell as much 10% at the start of trading in Frankfurt, before stabilising.

Investors are try to calculate the full damage that this crisis will cause to the company, ahead of today's crucial board meeting.

3rd day of losses for #Volkswagen - shares fell as much as 10% when Frankfurt trading began http://t.co/m5SaEsuXKs pic.twitter.com/1XTkgXwFco

8.37am BST

Volkswagen's rigging of emissions tests for 11m cars means they may be responsible for nearly 1m tonnes of air pollution every year.

That's roughly the same as the UK's combined emissions for all power stations, vehicles, industry and agriculture, a Guardian analysis suggests.

8.30am BST

Mike Hawes, chief executive of the UK's Society of Motor Manufacturers and Traders (SMMT), is defending the industry.

He tells the Today Programme that Europe is improving its testing system; technology will soon allow cars to be tested on the road, not just in the labs.

8.21am BST

Monique Goyens, Director General of BEUC, which represents European Consumer Organisations, is discussing the crisis on the Today Programme now.

How much confidence can consumers have in the car industry?

"It does not deserve the consumer's trust if there is a cheater in the room, which there was in this case.

"When you limit the resources to the market, you open the safety net and give more room to cheating"

8.13am BST

The VW crisis is a blow to the reputation of Germany's manufacturing base.

Professor Karel Williams from Manchester Business School, told Radio 4's Today Programme that:

Germany has been lecturing the Greeks for years on how they cheated on the budget deficit calculations and now look at this Germany's largest company is cheating on emissions.

It's not just a crisis for the company" it is a major set of issues about ineffective regulation as in Libor" and all the rest of that.

8.10am BST

Germany's Deutsche Bank has just cut its recommendation on Volkswagen from 'buy' to 'hold', and slashed its earnings forecasts by up to 35%.

Deutsche also warned that the full magnitude of the scandal can't be calculated yet.

. @Volkswagen an "investor's nightmare" says @DeutscheBank, uncertainty on all levels...earnings estimates slashed up to 35% 2015-17

8.05am BST

Over in Shanghai, the main Chinese stock market has closed 2% lower after today's weaker-than-feared factory data.

The news that manufacturing output is falling at the fastest rate since 2009 (see here) spooked traders, and alarmed analysts.

New export orders have really collapsed. It means global trade is facing headwinds, and even China can't escape that

It's not so bad that we need to hit the alarm button, but the decline in the economy is evident.

7.58am BST

You know your company is facing a crisis when its woes are splashed across the front pages of Britain's newspapers:

Wednesday's Guardian front page: Deal to give homes to 120,000 refugees opens new rifts in EU #tomorrowspaperstoday pic.twitter.com/Zcgg1AuO1Q

Wednesday's Telegraph front page: VW scandal: petrol cars could also be rigged #tomorrowspaperstoday #bbcpapers pic.twitter.com/Xk57VPnxLq

Wednesday's FT front page: VW scandal sparks sector turmoil #tomorrowspaperstoday #bbcpapers pic.twitter.com/uFrlCYEKCd

Wednesday's Times front page: Volkswagen in meltdown after faked diesel tests #tomorrowspaperstoday #bbcpapers pic.twitter.com/l3iGs5Sdc5

7.50am BST

Volkswagen CEO Martin Winterkorn's fate could be decided today, as the company's board meets to discuss the crisis.

The 68-year-old CEO's survival hangs on convincing a few key power players, including Wolfgang Porsche, head of the family that controls a majority of VW's voting shares; Bernd Osterloh, VW's influential labor leader; and Stephan Weil, prime minister of Lower Saxony, which has special blocking rights at the company.

All three are on the committee, which is set to vote on his future.

7.43am BST

Traders in Frankfurt are predicting that Volkswagen's share price will fall again today, when the market opens in around 20 minutes.

No end to @Volkswagen pain today as stock already trading lower in pre-market...EU27b = 1/3rd wiped off market value last 2 days

7.39am BST

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

Two stories are going to dominate today. The unfolding crisis at German carmaker Volkswagen, and fresh fears over China's economy after more weak economic data overnight.

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