Volkswagen boss faces probe over fraud allegations

German prosecutors have launched an investigation into fraud allegations against former Volkswagen boss Martin Winterkorn over the carmaker’s rigging of diesel emissions tests.

The German company also suspended three top engineers as it tried to get to grips with a scandal which has knocked more than a third off its market value, threatens to rock the global car industry and could damage Germany’s economy.

Volkswagen has admitted cheating diesel emissions tests in the United States but Germany’s transport minister says it also rigged tests in Europe, where it has much bigger sales, and it faces the worst business crisis in its 78-year history.

Volkswagen’s upmarket brand Audi confirmed that 2.1m of its vehicles are among those with engines affected by the defeat device software used to con testers in the US.

Underlining Germany’s determination to find out who was responsible for a crisis that has tarnished the image of the country’s industry on the world stage, the prosecutor’s office said Winterkorn was being investigated over “allegations of fraud in the sale of cars with manipulated emissions data”.

Winterkorn, who was replaced on Friday by company veteran Matthias Mueller, said when he quit last week he was not aware of any wrongdoing on his part but wanted to give the company a new start.

He also agreed to appoint a US law firm to conduct a full investigation.

In a further sign of Volkswagen efforts to tackle the crisis, sources said Volkswagen had suspended Heinz-Jakob Neusser, the head of brand development at its core VW brand.

Also suspended were Ulrich Hackenberg, the head of research and development at premium brand Audi who oversees technical development in the group, and Wolfgang Hatz, R&D chief at sports-car brand Porsche who heads group engine and transmissions development, they said.

One source said Hackenberg was taking legal action against the decision. Volkswagen and Audi declined to comment, while the suspended executives could not immediately be reached.

Winterkorn, the highest paid CEO on Germany’s blue-chip Dax stockmarket last year, could also not be reached for comment.

A source close to Volkswagen’s board said its executive committee would meet today to discuss the appointment of US law firm Jones Day to lead an external investigation.

The crisis shows no sign of dying down, however.

Two German newspapers said on Sunday Volkswagen’s own staff and one supplier had warned years ago about the illegal use of so-called ‘defeat devices’ to detect when a car was being tested and alter the running of its diesel engine to conceal their emissions of toxic nitrogen oxides.

Environmental campaign group Transport and Environment published data yesterday showing that some new Mercedes, BMW and Peugeot cars use 50% more fuel than lab tests indicate, saying this was evidence of a wider industry problem.