Volkswagen AG (ADR) (OTCMKTS:VLKAY) did not waste any time naming its new chief executive on Friday, replacing Martin Winterkorn who just quit over the scandal surrounding the company.
Volkswagen’s supervisory board met at their headquarters in Wolfsburg to choose a new leader, but according to several reports, the company has already decided to bring in the chief of the Porsche division.
Sources close to the supervisory board, said 62 year old Matthias Mueller has been selected for the position left by Winterkorn two days ago. The now former CEO left the company over a scandal that took the automobile industry by surprise.
VW shares, which have picked up a little since the drop earlier this week, hit 117 euros during early trading on the Frankfurt stock exchange, the number was a 4 percent increase from yesterday.
The scandal, which surfaced a week ago when US officials accused the company of cheating and launched an investigation, is being looked at by other countries, with France and South Korea making separate investigations.
The scandal threatened to spread to other German automakers yesterday. One of them was Bayerische Motoren Werke AG (FRA:BMW), which saw shares drop almost ten percent at one point yesterday after Auto Bild reported that emissions from one of its diesel models were 11 times higher than the limit. But the company has denied cheating in pollution tests.
Volkswagen was hit hard by the scandal after it was revealed that the car maker had around 11 million diesel cars equipped with devices to fool the emission tests.
Days after the scandal surfaced, Winterkorn, 68, submitted his resignation, saying he was shocked and stunned by the information and took responsibility as leader of the company, even though he didn’t know what was going on.
In his resignation, he said the company needed a fresh start and that he would begin the process by leaving Volkswagen.
Business daily Handelsblatt revealed that the board members had agreed to make Mueller the new leader. The decision is not official since it has to be approved by the full 20 member board later today. The company will make the decision public after it is done.
Mueller, who was appointed as CEO of Porsche five years ago, has a lot of support in the company. If the board approves him as new leader, Mueller would have to work hard to tackle all the legal threats surrounding the car maker.
New Challenges and Payout
On top of the investigations by several countries, public prosecutors in Germany are looking at the legal suits already filed by a few individuals. The new CEO will have the challenge of coming up with a new strategy for the company.
The company had record sales and earnings last year but now has bigger challenges ahead. Before the scandal surfaced, Volkswagen was trying to make an impact in the US with its diesel engines. That will be a lot harder now that its reputation has been damaged by the scandal.
Not all is bad for Winterkorn, he is set for a $68 million payout, according to company rules. He was Germany’s highest paid executive last year and the year before. The company has not said if he will get all of the money but many of the senior board members insist that he knew nothing about this.