Rupert Stadler Audi CEO arrested over Dieselgate scandal

Prosecutors are hunting their biggest scalp yet in the Dieselgate scandal, arresting Audi CEO Rupert Stadler. The carmaker already has a replacement, Handelsblatt has learned.
You should be worried.

Nearly three years after Volkswagen sent tremors through the global car industry by admitting to cheating emissions tests, prosecutors in Germany are stepping up. Rupert Stadler, head of VW subsidiary Audi and a key player in the whole Dieselgate affair, has been taken into custody.

The arrest took place early Monday morning at his home near Ingolstadt in Bavaria. It doesn't come as a total surprise: Last Monday, prosecutors in Munich confirmed that they were investigating Mr. Stadler and raided his home, along with that of another executive board member.

Though he has denied the charges, the carmaker's response could be swift. VW's supervisory board intends to place Mr. Stadler on administrative leave, Handelsblatt has learned from senior company sources. Bram Schot, currently head of sales and marketing, will be named interim CEO.

Mr. Stadler stands accused of fraud and “indirect false certification.” The charges rest on allegations that Mr. Stadler was aware of Dieselgate before it became public, and sanctioned the ongoing sale of manipulated cars in Europe even after being alerted to probes in the United States. According to Handelsblatt information, prosecutors have long held evidence alleging that Mr. Stadler was aware and may have even signed off on the manipulation.

The sudden arrest was prompted by a belief that Mr. Stadler planned to contact others involved in the case. This was reportedly based on tapped phone conversations. “We had concerns that this was pending and therefore had to act quickly,” said a spokesperson for the prosecutor's office in Munich. A judge accepted the “danger of collusion” allegations late Monday morning, sanctioning his continued detention.

Following in US footsteps

Mr. Stadler's arrest is not the first in the ongoing case, but it is by far the biggest in Germany. Wolfgang Hatz, former head of engine development at Porsche (another VW subsidiary) is also still in custody. In the United States, where investigations into Dieselgate originated, prosecutions have been moving more swiftly. Former VW CEO Martin Winterkorn was indicted earlier this year, while two former VW managers are already serving jail terms.

VW’s scandal first broke in September 2015, when the carmaker admitted to US authorities that it had manipulated software in some 11 million diesel-powered cars worldwide to cheat emissions tests. Audi only sold 220,000 manipulated cars, but played a bigger role in developing the software. VW and Audi executives, including Mr. Stadler, have long denied knowing anything about systematic cheating until that time.

Sources in VW suggested the latest arrest could be a tactic by Munich prosecutors to "raise the pressure" on the carmaker to move more quickly in addressing the damage from the scandal. VW this month agreed to a €1 billion fine from prosecutors in its home district of Braunschweig. Many now speculate that a similar fine could be awaiting Audi in Munich.

Time to move forward

Mr. Stadler, who has led Audi since 2007, has been in investigators' cross hairs for the past two and a half years and faced repeated calls to resign. Yet Mr. Stadler continued to be backed by VW's supervisory board as recently as last week. That support had allowed him to survive despite six other Audi managers facing the axe since 2015, not to mention two CEO changes at parent company VW.

With Monday's arrest, the board's backing finally became untenable. The decision to place him on administrative leave will be signed off on by the supervisory boards of VW and Audi later Monday, sources said. Shareholders probably helped the process along: Shares of VW fell more than 3 percent on the news on Monday, making it the biggest loser of Germany's DAX.

Bram Schot, a Dutch citizen who has been marketing chief only since September, is considered interim boss. Sources on the supervisory board say a more permanent replacement could be agreed in the coming weeks. Mr. Schot has good chances of getting the job. Either way, he'll have to hit the ground running. Whoever is in charge will expected to make swift progress in cleaning up Audi's mess.

Jan Keuchel, Stefan Menzel, Martin Murphy, Rene Bender, Lars Ophühl of Handelsblatt and Christopher Cermak of Handelsblatt Global contributed to this story. To contact the authors: [email protected]

This story was updated at 4 p.m. CET on Monday with news of Mr. Stadler's replacement at Audi.