Dieselgate could cost VW CEO his job

Volkswagen CEO, Martin Winterkorn, could lose his job over accusations that the German car-maker cheated US air pollution tests for diesel cars, according to new reports overnight.

The Volkswagen Group is already facing unprecedented fines of up to $US18 billion after it admitted its diesel-powered cars were fitted with ‘defeat device’ software that cheated official US EPA air pollution tests.

Winterkorn, who is on the eve of signing a new contract to head up the Volkswagen Group until 2018, could now lose his job altogether or face a boardroom coup from senior VW execs.

There has already been widespread calls from the industry for the CEO to fall on his sword and resign following the car-maker’s behaviour deemed by one analyst, Arndt Ellinghorst from Evercore ISI, as "worthy of a back-street garage looking to get a used car through a mandated vehicle inspection”.

"This is not your usual recall issue, an error in calibration or even a serious safety flaw. There is no way to put an optimistic spin on this -- this is really serious,” said an analyst from car industry experts, Berstein.

According to some industry commentators, Volkswagen’s behaviour could see its image reduced to pariah status, with the federal government and consumers turning their back on diesels.

The clever ‘defeat device’ software, fitted to half a million 2.0-litre TDI engines, was employed when it detected the car was undergoing an EPA sanctioned test and switched on its full emission controls. When the software was not in operation, VW and Audi cars emitted up to 40 times the government allowed nitrogen oxide levels in real-world driving.

Currently in the US, 20 to 25 per cent of all VWs and Audis sold are diesels. Any ban could drastically hit the Volkswagen Group's profits before the huge fine is taken into account.

The rot has already set in.

Overnight VW shares had lost 22 per cent of their worth before eventually stabilising, resulting in the Volkswagen Group-owning Piech and Porsche family dynasties losing a combined €8 billion.

As well as the huge fines, US prosecutors are expected to call for a senior Volkswagen Group executive to take responsibility for the foul play and resign. Rumours in Germany are that Winterkorn is refusing to go.

According to a source close to Volkswagen speaking exclusively to motoring.com.au, prosecutors are likely to focus on four senior execs in its investigations  over the claims of foul play.

Former Volkswagen Group Chairman Ferdinand Piech, current CEO Martin Winterkorn, former head of VW development Ulrich Hackenberg and former powertrain boss Wolfgang Hatz.

Out of the four only Dr Winterkorn now works directly for Volkswagen, adding pressure for the CEO to go.

However, according to confidential sources it would have been ‘virtually impossible’ for any of the four to have known about the EPA cheating software.

The culture of plausible deniability is said to be rife within large car-makers to ensure its top execs are never embroiled in scandals like these.

General nervousness throughout the car industry has also seen fellow German car-makers shares slip with BMW down 3% and Daimler down 5%, forcing both to issue statements to the stock market and news outlets.

BMW: "There are clear laws and guidelines governing this and we adhere to them. Everything else is manipulation and deception and we don't commit such fraud.”

Daimler: “We heard of the EPA's accusations against VW from the press. The issue described by the press does not apply to Mercedes-Benz Cars”.