CEO's arrest throws Volkswagen into turmoil

As VW attempts to recover from its infamous emissions scandal, the CEO of its Audi division has been detained

BY Nurhuda Syed 20 Jun 2018

Volkwagen’s CEO for its Audi brand has been arrested as part of investigations into an emissions cheating scandal.

The arrest threw the auto giant into turmoil. The supervisory board, which is already in crisis mode, is now scrambling to find a stand-in boss for Rupert Stadler after he was arrested in Germany.

The latest arrest renews a debate over VW’s corporate governance, which could further raise tensions among its board.

“His arrest is another low point in VW’s diesel saga,” said analysts, who criticised the group’s slow pace of reform. “Almost three years after the diesel scandal broke, it takes police to take action against the Audi CEO.”

Stadler was being investigated for suspected fraud and false advertising as well as his alleged role in helping to bring cars equipped with illegal software into Europe.

Munich prosecutors said Stadler was being held on fears he might hinder their investigations.

“We need to find a solution for Audi’s leadership for the time when he is not here,” a source familiar with the talks told Reuters.

Ever since the scandal broke in 2015, VW had long maintained that only lower-level managers knew of the scandal, but criminal charges were filed by US authorities against former VW boss Martin Winterkorn earlier this year. This was followed with a wider investigation into Audi.

Winterkorn had resigned days after the scandal was exposed. However, Stadler resisted the same calls to quit and received backing by the Porsche and Piech families to remain in his post.

After the story broke, former vice chairman of General Motors Bob Lutz suggested that VW’s then CEO Ferdinand Piech’s “dictatorial” management style was the main reason why the scandal occurred.

Lutz alleged that Piech was “completely merciless” and threatened to fire people if they didn’t perform, thus developing a culture of fear where no one dared to speak up in fear of losing their jobs.