Volkswagen Chief Executive Martin Winterkorn survived a fierce battle earlier this year with Ferdinand Piëch, the controlling shareholder who had dominated the automaker for two decades before resigning as board chairman in April.
Mr. Winterkorn appeared to be untouchable, as chastened board members rewarded him with a contract extension. After that, he was expected to ease into the chairmanship of VW’s supervisory board, reaching the pinnacle of power in Wolfsburg.
But over the weekend, in the space of three days, Mr. Winterkorn’s future at the world’s largest automaker suddenly came into doubt following VW’s admission that it had systematically tricked U.S. emissions regulators to sells its cars.
The investigation by the U.S. Environmental Protection Agency broke late Friday and by Sunday, the once untouchable VW chief executive was saying he was “deeply sorry” for breaking the public’s trust after admitting to cheating on U.S. air pollution tests for years.
The damage to Volkswagen, one of Germany’s iconic engineering giants and a symbol of the country’s economic rise in the euro era, is likely to be severe. The company, for willfully seeking to evade U.S. regulations, could face more than $18 billion in potential fines and a backlash from consumers in a market – the world’s second-biggest – where the Wolfsburg-based automaker had already struggled.
Shares of VW plunged 19.3 percent on Monday, the first opportunity since the scandal broke, shaving €15 billion, or $17 billion, off the value of the world’s largest volume producer of automobiles and trucks. At noon in Frankfurt, VW shares were down €31.07 at €130.10.
The EPA on Friday said that the German carmaker had admitted to equipping its U.S. diesel vehicles with software that turns on full pollution controls only when the car is undergoing official emissions testing. During normal driving, the cars with the software – known as a “defeat device” – would pollute 10 times to 40 times above the legal limits, according to the agency.
Shares in Mercedes maker Daimler and BMW were each down almost 4 percent on the Frankfurt Stock Exchange, as analysts sought to trace the damage from VW’s disclosures and whether other automakers were using the same technology.