Matthias Müller In Volkswagen's Hot Seat

Volkswagen's supervisory board has grown increasingly concerned about Matthias Müller's leadership after his botched trip to the United States. The board still backs the chief executive, but the grace period is over.
He'd rather not take questions at this time.

It's time for Matthias Müller to face the music. When Volkswagen's supervisory board meets on Tuesday, the chief executive will face a grilling over his recent trip to the United States, which turned into a public relations fiasco.

Mr. Müller's trip was supposed to be the turning point where Volkswagen finally brought the emissions scandal under control. Instead, the chief executive botched an interview with U.S. broadcaster National Public Radio and was rebuffed by the Environmental Protection Agency.

"In contrast to how it was billed, the trip to the United States was a step backward," a source close to the board told Handelsblatt on the condition of anonymity.

Though the board members are critical of Mr. Müller's public performance during the trip, they still stand behind him fully, according to Handelsblatt's sources.

The fiasco began at a restaurant named Fishbone's, where Volkswagen was throwing a party on the eve of the Detroit Auto Show, as the automaker has in years past. But this year, because of the emissions scandal, Mr. Müller was quickly surrounded by cameras, microphones and journalists asking questions.

The situation is serious, there's no grace period anymore. Anonymous VW supervisory board member

Black barrier tape, meant to keep some distance between Mr. Müller and the reporters, proved ineffective. Questions came from all sides, in German and English. Plans for a more organized question-and-answer session were quickly abandoned.

Sources close to Mr. Müller told Handelsblatt that the chief executive wanted to answer everyone's questions, making sure to respond in English. After more than hour, reporters were still crowding around him.

Sonari Glinton, a veteran business reporter with National Public Radio, was skeptical there would be anything new to report on that night. Mr. Müller would likely just read from carefully prepared statements, Mr. Glinton thought.

The NPR reporter spoke beforehand with an American Volkswagen spokesman. He said there probably wouldn't be any new developments, but they hadn't read the final version of Mr. Müller's speech. That struck Mr. Glinton as strange.

One part of the chief executive's speech that evening caught the NPR reporter's attention. Mr. Müller called the emissions scandal a "technical problem." Mr. Glinton wanted to know more. After waiting patiently for the crowd of journalists to disperse, he spoke with Mr. Müller for four minutes. The NPR reporter could hardly believe what he was hearing.

"We didn't lie," Mr. Müller said, refusing to acknowledge that the emissions scandal was not just a technical problem, but also an ethical problem.

Mr. Glinton listened to the recording one more time. It was the biggest faux pas of Mr. Müller's trip to the United States. Hours after the interview was aired on Monday, U.S. Volkswagen representatives called the NPR reporter.

Mr. Glinton told Handelsblatt that a Volkswagen spokesman in America asked him to interview Mr. Müller again. He agreed, and arrived at Volkswagen's area at the Detroit Auto Show for the second interview. A dozen other Volkswagen employees were present with Mr. Müller, including the automaker's senior U.S. lawyer, David Geanacopoulos.

On Sunday, Mr. Glinton, recalls, Mr. Muller came across as a little condescending, but on Monday, he was a different person. He apologized in a clear and professional manner.

Volkswagen hasn't been able to explain Mr. Müller's faux pas in Detroit, saying only that it was loud at the restaurant on Sunday. Mr. Glinton disagrees.

The experienced business reporter also rejected any suggestion that Mr. Müller' statements might have been taken out of context, and said the interview was only very lightly edited, to take out irrelevant material, before it aired.

After the botched interview, Mr. Müller went on to hold a failed meeting with the Environmental Protection Agency, which rejected his proposed recall of nearly 600,000 diesel vehicles with software installed to cheat emissions tests.

For the supervisory board, Mr. Müller's trip to the United States came much too late. The board had pushed him to visit the United States soon after taking over as chief executive last fall. But Mr. Müller resisted, insisting on the importance of having concrete plans before meeting with U.S. regulators.

Before Mr. Müller departed for Detroit and Washington, sources within Volkswagen insisted that the chief executive had proposals for all of the affected series and model years. American regulators, however, weren't interested in reaching a compromise.

"The situation is serious," one supervisory board member told Handelsblatt. "There's no grace period anymore."

Volkswagen's problems don't end there. Over the weekend, 66 institutional investors in Germany announced a lawsuit against the automaker over losses suffered since the emissions scandal, according to Klaus Nieding, a lawyer at Nieding and Barth, the German law firm. Nieding and Barth is working with MüllerSeidelVos and Robbins Geller Rudman and Dowd, a U.S. law firm, to represent investors that have contacted DSW, a German shareholder protection association.



Astrid Dörner is part of Handelsblatt's team of correspondents covering finance in New York. Christian Schnell is an editor with Handelsblatt, covering the stock market and German auto industry. Martin Murphy specializes in the automotive, defence and steel industries. To contact the authors: [email protected], s[email protected] and [email protected]