Dieselgate Inquiry For Winterkorn, Time to Face the Music

The former VW chief can expect a tough grilling from the German parliamentary committee investigating Volkswagen this week, as the lawmaker in charge of the inquiry tells Handelsblatt he expects clear answers.
Quelle: dpa
Martin Winterkorn faces some tough questions.
(Source: dpa)

Martin Winterkorn has not been seen or heard in public for a long time. After his resignation as Volkswagen’s chief executive in September 2015, he largely withdrew. But he can’t stay out of the public eye any longer. This Thursday he has to go to Berlin to appear before the German parliament inquiry committee into the company’s emissions manipulation. Mr. Winterkorn had hoped to defer his appearance but said last week that he will attend.

Lawmakers made it clear they expect Mr. Winterkorn to report openly on the diesel scandal at the hearing. "If Mr. Winterkorn refuses to give evidence, it would be the equivalent to an admission of guilt," the chairman of the committee, Herbert Behrens of the Left Party, told Handelsblatt.

Mr. Winterkorn definitely bears some responsibility. Herbert Behrens, Chairman of Bundestag committee investigating VW diesel scandal

"Against the background of the new findings from the United States, we would like to know from Mr. Winterkorn whether the board was actually informed that illegal switch-off devices were used in VW vehicles," Mr. Behrens said.

“Mr. Winterkorn definitely bears some responsibility,” he said. Either he, as CEO, wasn’t keeping his house in order -- that’s a failure -- or he knew about the manipulations, which would make the scandal even greater than it already is.”

Mr. Behrens accused Volkswagen, as well as the entire German automotive industry, of maintaining too cozy of a relationship with the transport ministry and its associated supervisory authorities. "There was organized irresponsibility," he added. Someone simply looked past the inflated emissions values, he said.

Mr. Behrens said there was an awareness of the emissions issue for years before the fraud became public.

“The survey carried out by the representatives of the Federal Motor Transport Authority showed that there were already significant deviations between laboratory tests and the actual emissions of vehicles on the road in 2007,” he said. “We have determined that the Ministry of Transport has exercised a considerable influence on the [Federal Motor Transport Authority] not to penetrate too deeply into the problem of excessive exhaust gas levels and to uncover the shortcomings of the automotive industry.”

The politician called for more transparency in relations between the automobile industry, the ministry and the authorities. He also said there was need for an "independent supervisory body which, if necessary, can pull vehicles out of circulation or stop sales," something the Federal Motor Transport Authority is not in a position to do.

Last week, the VW Group reached an agreement with the U.S. Department of Justice in that country’s criminal proceedings against the automaker. The company will pay a fine of €4 billion ($4.26 billion), and the investigations against the company will be closed. In the case’s corresponding "Statement of Facts," six VW employees were named - but Martin Winterkorn and other members of the management board were not listed.

This does not mean, however, that the former chief executive is safe. The U.S. judiciary is only discontinuing its investigations against the company, but prosecution of individual VW managers is still possible.

"The investigations continue," a press officer from the Department of Justice confirmed in Washington. And it seems that the U.S. judiciary means business. VW manager Oliver Schmidt, who was arrested a week ago in Florida, faces up to 169 years in prison if convicted of the 11 charges against him.

The scandal continues to cause a stir in Germany. The central question is whether Martin Winterkorn was informed about the emission manipulations early and accepted it, or even ordered them.

Over the weekend, the "Bild am Sonntag" newspaper reported on previously unknown internal VW documents, which suggest that Mr. Winterkorn did indeed make the decision to pursue the fraud. These internal papers were presented on July 27, 2015 at a meeting with Mr. Winterkorn in Wolfsburg, the newspaper reported. The documents apparently show how, two months before the scandal became public, the company was discussing when to tell the U.S. authorities the truth.

Those in stakeholder circles confirmed on Sunday that these papers existed. However, apparently Mr. Winterkorn has emphasized during internal discussions that these documents were never presented to him. Sources said that he said that he was told at that meeting that the problems with the U.S. authorities could be quickly resolved.

According to an affidavit from the Federal Bureau of Investigations related to the Oliver Schmidt arrest, the executive management in Wolfsburg had been briefed by Mr. Schmidt on July 27, 2015 on the “existence, purpose and characteristics of the defeat device.” The affidavit goes on to say that, “In the presentation, VW employees assured VW executive management that U.S. regulators were not aware of the defeat device … Rather than advocate for disclosure of the defeat device to U.S. regulators, VW executive management authorized its continued concealment.”

Again, on this point, the proof is missing that the former executive committee chief was informed about the manipulations at an early stage. Mr. Winterkorn and Volkswagen have always emphasized that they were not fully aware of the exhaust gas manipulations until September 2015. Mr. Winterkorn's attorney declined to comment.

This key meeting was also the subject of discussion at the supervisory board meeting last week, according to participants of that meeting. Volkswagen's brand manager, Herbert Diess, emphasized that he had not known the enormous financial risk of the diesel scandal. The supervisory board looked into the documents, which had become public over the weekend. Mr. Diess emphasized, like Mr. Winterkorn, that he had not previously seen the documents.

VW already said in a statement to the regional Braunschweig court in early 2016 that Mr. Winterkorn and Mr. Diess did participate in the meeting on July 27, 2015. "It is not possible to reconstruct the concrete content of this informal discussion nor the specific times at which the respective members of the executive board took part,” the company said in a defense plea. It is possible, the company continued, but not certain, that the software alteration was mentioned at that time as a reason for the higher emissions values.

Volkswagen is sticking to this position. "The account in the defense plea filed in March 2016 to the regional Braunschweig court was based on the state of knowledge at the time from the independent investigation of the law firm Jones Day. According to current knowledge, nothing substantial has changed," said a company spokesman.

While Volkswagen is currently backing up its former chief executive on the issue of the July 2015 meeting, the company may end up suing Mr. Winterkorn itself for damages. Such a move would be based on the so-called organizational liability of the executive board. Volkswagen could make its former CEO responsible for the fact that, as the company’s CEO, he must have been informed about all the important events in the company, including the problems with the diesel engine.

The VW supervisory board has hired the renowned corporate lawyer Michael Arnold from the law firm Gleiss Lutz to examine possible claims. Mr. Arnold is working on a corresponding expert opinion. "In accordance with its legal obligations, the supervisory board has been examining whether it is obliged to assert claims for damages against individual members of the management board since fall 2015. The investigation is ongoing," said a VW spokesman.

On the question of possible managerial liability, there is some evidence that Mr. Winterkorn could be held liable. The agreement with the U.S. Department of Justice provides additional support. Even if no one from the management board ends up as one of the defendants, the allegations against Volkswagen are significant. The large number of people involved in the diesel scandal alone could be a clear indication of an institutional failure. Then if the supervisory board does not want to make itself open to attack, it would have to take action against Mr. Winterkorn. The supervisory board could discuss the issue at its next meeting. Whether Mr. Winterkorn might end up paying for the scandal himself – and how much -- remains to seen.

 

Daniel Delhaes is a Berlin-based Handelsblatt correspondent, reporting on politics, transport and airlines. Martin Murphy covers the steel, car and defense industries for Handelsblatt. Stefan Menzel writes about the auto industry focusing on Volkswagen. Thomas Jahn is Handelsblatt’s New York bureau chief. Volker Votsmeier is an editor with Handelsblatt’s investigative reporting team. To contact the authors: [email protected],  [email protected],  [email protected],  [email protected] and [email protected],