German prosecutors open probe into VW ex-boss

20th June 2016, Comments 0 comments

Volkswagen's former boss Martin Winterkorn is under investigation for having allegedly manipulated the market by holding back information about emissions cheating at the automobile giant, German prosecutors said Monday.

The probe is the latest in a series of legal headaches for the embattled carmaker, which sank into its biggest ever crisis after it emerged that it fitted millions of cars with a device aimed at skewing pollution tests.

"The initial suspicion of market manipulation is directed against two former board members of the VW Group. Among them is the former chief executive of the Volkswagen group, Professor Dr Martin Winterkorn," said prosecutors in a statement.

Investigators in Brunswick, in Lower Saxony state where VW is based, did not name the second suspect but said the individual was not the group's current chairman, Hans Dieter Poetsch -- who was financial director when the scandal erupted in September.

Listed companies are required to disclose information that could affect market prices immediately.

But VW complied with its disclosure obligation only on September 22, 2015, prosecutors said, four days after US regulators went public that they were charging the company for emissions cheating.

"There are sufficient indications suggesting that the obligation to make a disclosure statement could have been met at an earlier date," prosecutors said.

Shares in VW plunged 17.14 percent on Monday September 21, the first trading day after the US charge was made public.

They sank another 19.82 percent on Tuesday, when the company revealed that as many as 11 million diesel cars worldwide were equipped with the pollution cheating device.

Some 25 billion euros in market capitalisation were wiped out in two days.

- Incalculable costs -

The embattled auto giant's management will face the wrath of shareholders at an annual meeting on Wednesday.

The costs of the scandal are still incalculable and it is not yet known whether VW's own internal investigation will pinpoint the major culprits behind the scam.

The group was compelled to set aside 16 billion euros ($18 billion) in provisions to cover the costs of the affair so far, pushing it into a net loss of 1.6 billion euros, the carmaker's first loss in 20 years.

It is also still trying to reach agreement with the US authorities over the modalities for rectifying the problem and compensating car owners of the 500,000 vehicles affected in the US.

The carmaker reached an agreement in principle in April offering US owners of some 480,000 illegally polluting diesel cars options of "substantial compensation" and to fix the cars, or to buy them back.

VW, which owns 12 different brands ranging from Volkswagen and Audi to Porsche and SEAT, has already started recalling the affected vehicles in Europe, but is not offering owners financial compensation.

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© 2016 AFP

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