Parliamentary Appearance Dodging Key Questions, Ex-VW CEO Claims "Responsibility" for Dieselgate

In his first public appearance since the Dieselgate scandal broke in September 2015, Martin Winterkorn said he was not aware of the automaker's systematic emissions rigging fraud until days before he resigned. With two lawyers at his side, he refused repeatedly to say what he knew, and when.
Quelle: Bloomberg
Martin Winterkorn faced tough questioning in the German parliament.

Former Volkswagen chief executive Martin Winterkorn has told the German parliament that he "bears responsibility" for the Dieselgate scandal.

Breaking his 16-month silence on the crisis, which has cost $24 billion in settlements so far, he told a cross-party committee investigating the emissions rigging that it "hurt confidence of customers and public at large."

"As CEO, I bear responsibility for what has happened," said Mr. Winterkorn, who resigned five days after the scandal became public in 2015. "I am a realist. I have to accept that my name has been tied closely with the diesel affair."

When asked exactly when he learned of the emissions-rigging at Europe's largest automaker, he said he "cannot answer," citing the need to wait for an investigation by German prosecutors to finish. He was warned before the hearing that false testimony before the parliamentary committee could invoke criminal charges.

It is incomprehensible why I have not been informed early on developments in the U.S. Martin Winterkorn, Former VW CEO

U.S. and German prosecutors are already investigating Mr. Winterkorn and other VW executives over their role in the scandal. All face fines or prison if found guilty of wrongdoing. The Wolfsburg-based carmaker itself faces hundreds of lawsuits from investors and consumers, who have demanded compensation for the lost value of their stock or cars.

VW's preference shares briefly traded in negative territory before and during Mr. Winterkorn's two-hour long testimony, but rose as much as 1.4 percent on Thursday afternoon after the hearing had ended.

Referring to the alleged cover-up of the scandal, which was exposed in the U.S., Mr. Winterkorn said: "It is incomprehensible why I have not been informed early on developments in the U.S." He said he was not forewarned of the illegality shortly before it was exposed and became public on 18 September 2015.

In response to a question from committee chairman Herbert Behrens, a socialist lawmaker from the opposition Left Party who has been a harsh critic of 69-year old Mr. Winterkorn, he added that he was not aware of Chancellor Angela Merkel's talks with Californian air regulator CARB in 2015. It was CARB that made the discovery of the emissions rigging.

He said that Volkswagen was notified of a problem by CARB on 18 September, that on 19 September the firm held a big conference call and on 20 September it became clear more vehicles were involved in different countries. "On 22 September, we had the figures on the table," he added. "But the measures to solve the vehicles' problems were not yet know."

Mr. Winterkorn batted away a suggestion that he knew about emissions rigging in the U.S. as early as 2014, saying he cannot answer until the prosecutors' report is completed.

He briefed Ms. Merkel, and transport minister Alexander Dobrindt, on the scandal on 21 and 22 September 2015, days after it broke, he said.

A calm but at times unintelligible Mr. Winterkorn answered almost all questions without conferring with his lawyers Kersten von Schenck and Felix Dörr. But he said several times that he could not fully recall some details.

Green MP Oliver Krischer suggested that fitting the illegal cheat software was "not a thing of three people but full teams and departments. Is that true?"

Mr. Winterkorn replied: "I believe these were not two or three people, but more. How many exactly, I don't know. Software management of engines is very complicated," he added.

Mr. Winterkorn told MP Ulrich Lange, from the conservative CSU party, that VW "closely cooperates" with regulators.

He was asked if he agrees with the statement that emissions systems are not per se illegal in Europe, a contentious point. Mr. Winterkorn replied that it was a legal issue and that he can't answer. But he added that software to control CO2 emissions is legal in some European countries, such as Holland.

Mr. Lange pushed Mr. Winterkorn on whether a recall of 500,000 cars in the U.S. in 2014 was actually over emissions rigging and not engine performance, as VW has claimed. "Recalls are always in cooperation with regulators," said the former VW boss, who said he did not know about the event.

Challenged by panel member Arno Klare, of the left-wing Social Democrat Party (SPD), on whether VW purposefully falsified emissions levels in the U.S. to avoid customers having to tank additives alongside fuel in diesel engines, thereby increasing costs, he said: "When emissions regulations are met, it is more convenient for customers to not have to fill up with a second substance."

Mr. Krischer also probed Mr. Winterkorn's knowledge of engine-control software, presumably in an effort to establish just how much he knows about the process and whether he could have grasped details when told about it. "I am not a software engineer and the nature of engine control by software is complicated," he replied.

Asked when he first heard of the term "defeat device," the name given to the emissions cheating software, Mr. Winterkorn said he had no knowledge of it before September 2015.

Speaking to Handelsblatt Global after the hearing, Mr. Behrens said: "I found it very disturbing that he as an executive said he had no knowledge of the matter. He said he did not know of the U.S. recall in 2014 that involved 500,000 cars and it was not a topic in the board. That is not my idea of how an executive board should work."

Also speaking after the hearing, Mr. Klare said: "I highly doubt whether Mr. Winterkorn and the board did not know earlier about the issues." The MP added that executives must have received signals before September 2015.

Mr. Winterkorn has previously said he was “not aware of any wrong doing” in the systematic installation of emissions-cheating software in millions of VW cars worldwide.

The committee's eight members are drawn from all parties of the lower house, including members from the Left Party and Greens Party, Chancellor Angela Merkel’s Christian Democratic Union party and her coalition partner, the Social Democrats.

Dozens of reporters gathered at the Bundestag building to hear what the former executive had to say, underscoring the huge interest in his appearance. In all, more than 100 people attended the proceedings.

As chairman of the investigating committee, Mr. Behrens had not planned to pull any punches.

“Mr. Winterkorn definitely bears some responsibility,” he told Handelsblatt on Monday. “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.”

“We would like to know from Mr. Winterkorn whether the board was actually informed that illegal switch-off devices were used in VW vehicles,” he said. Mr. Behrens had already stated that he thinks Volkswagen executives should face personal financial liability for the costs of the scandal.

VW admitted in September 2015 manipulating about 11 million diesel cars worldwide, including 585,000 in the U.S. and 8.5 million in Europe. It did so after U.S. environmental regulators CARB and EPA accussed the carmaker of falsifying emissions tests.

The affected vehicles, which also include those made by VW-owned Audi, Porsche and Skoda, were fitted with illegal software which artificially decreased nitrogen oxide emissions when it detected that the auto was being tested, and later returned emissions to higher levels to boost performance.

The intentional deception blatantly violated environmental laws in many countries, including the United States, South Korea and Germany.

The Bundestag created the investigative committee in July 2016 to determine what knowledge the federal government had of the emissions cheating, and when VW executives became aware of the almost decade-long fraud.

VW has repeatedly said the manipulation was the work of a small group of mid-level engineers and that top executives only became aware of wrongdoing at the end of August 2015, and could only assess the scope of its financial impact on September 22, 2015, when they went public to shareholders.

The U.S. Federal Bureau of Investigation is examining whether Mr. Winterkorn and other board members knew of the scandal as early as July 27 2015, when VW employees discussed the “diesel issue” with Mr. Winterkorn and the head of VW Passenger Cars, Herbert Diess, who currently is still leading the VW core brand.

German prosecutors are investigating the two men and current non-executive supervisory board chairman Hans Dieter Pötsch, who was VW’s finance chief in 2015, for having delayed publishing stock-sensitive information regarding the scandal.

Volkswagen has denied wrongdoing, saying it informed investors in a timely manner in 2015.

The U.S. Department of Justice has so far indicted six VW managers, including Heinz-Jakob Neusser, who was a board member of VW Passenger Cars and its head of development in 2015. A seventh suspect, the German national James Liang, last year pleaded guilty to fraud charges.

VW’s former compliance chief in the U.S., Oliver Schmidt, is another of the six accused and could face a prison sentence of up to 169 years after being arrested while on holiday in Florida earlier this month.

“Traveling to the United States is not advisable to a board member,” Jürgen Wessing, a renowned corporate law expert told Handelsblatt. “It is possible that Mr. Winterkorn, too, could be detained.”

Last week, VW said in a settlement with the U.S. Department of Justice that it was “guilty of participating in a conspiracy to defraud the United States and VW’s U.S. customers and to violate the Clean Air Act by lying and misleading.”

The deceit, VW’s biggest scandal since its founding in 1937, led to a 40-percent drop in VW’s stock, a 2-percent drop in annual vehicle sales and a €1.6-billion loss in 2015. It has so far cost Europe’s largest carmaker $22.2 billion (€20.8 billion) in settlements with U.S. consumers, regulators, states and the Department of Justice and 2.1 billion Canadian dollars, or $1.6 billion, to compensate Canadian car owners. The actual amount VW will spend could end up to be lower, depending on how many car owners decide to sell back their manipulated vehicle to the company.

Quelle: dpa
Mr. Winterkorn was flanked by his lawyers in the committee room at the German parliament where the proceedings took place.
(Source: dpa)

VW’s preference stock is still down 10 percent compared with the level seen in September 2015, lagging a 16-percent rise of the German blue-chip DAX index. Investors and car owners on both sides of the Atlantic have sued the company, demanding damages for the lost value of their shares and vehicles. The total bill for the scandal could hit €30 billion, according to analysts.

The company, of which the German state of Lower Saxony owns 20 percent, will also cut 30,000 jobs, of which 23,000 will be in Germany, to help pay for it. VW employed 624,000 people worldwide at the end of September.

Mr. Winterkorn, in the meantime, continued to enjoy his salary throughout 2016 despite his departure and formally retired at the beginning of this month, enjoying an annual pension of €1.1 million – or €3,100 per day.

Despite the harm to the company’s reputation, VW managed to increase car sales in 2016, selling 10.3 million vehicles last year, up 3.8 percent from the preceding period. It might even become the world's largest carmaker based on vehicles sales later this month, when Toyota, currently the biggest producer, announces annual figures.

VW's revenue for the first nine months of last year was down 0.2 percent at €159.9 billion, while profit for its shareholders was up 50 percent at €5.7 billion due to lower Dieselgate provisions and the sale of its stake in car leasing unit LeasePlan.

 

Gilbert Kreijger, David Reay and Christopher Cermak are editors with Handelsblatt Global. Handelsblatt editors and correspondents Daniel Delhaes, Martin Murphy, Stefan Menzel, Thomas Jahn, Volker Votsmeier and Heike Anger contributed to this article. To contact the author: [email protected]

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