Emissions-Cheating Probe, Pressure Builds on Volkswagen CEO

TEMPO.CO, Frankfurt - The scandal engulfing Volkswagen, which has admitted cheating diesel vehicle emissions tests in the United States, spread on Tuesday as South Korea said it would conduct its own investigation and a French minister called for an EU-wide probe.

The German carmaker's shares fell to a new three-year low in early trade, extending Monday's 19 percent plunge after it admitted to using software that deceived U.S. regulators measuring toxic emissions.

Europe's biggest automaker could face penalties of up to $18 billion in the United States, as well as class-action lawsuits from buyers and damage to its reputation, with U.S. regulators alleging it misled them for more than a year.

VW, which for several years has been airing U.S. TV commercials lauding its "clean diesel" cars, was challenged by authorities as far back as 2014 over tests showing emissions exceeded California state and U.S. federal limits.

VW attributed the excess emissions to "various technical issues" and "unexpected" real-world conditions. It wasn't until the Environmental Protection Agency and the California Air Resources Board threatened to withhold certification for the automaker's 2016 diesel models that VW in early September revised its explanation.

A committee of Volkswagen's supervisory board is due to meet on Wednesday to discuss the crisis. The full board is due to meet on Friday to extend Chief Executive Martin Winterkorn's contract until end-2018.

"I am sure that there will be personnel consequences in the end, there is no question about it," supervisory board member Olaf Lies told German radio station Deutschlandfunk on Tuesday.

Some analysts suggest Winterkorn, who recently saw off a challenge to his leadership with the ousting of long-time chairman Ferdinand Piech, will have to go.

Winterkorn oversees group R&D operations and ran the core Volkswagen brand between 2007 and 2015, including the period when some of its cars were found violating U.S. clean air rules.

"Winterkorn either knew of proceedings in the U.S. or it was not reported to him," Evercore ISI analyst Arndt Ellinghorst said. "In the first instance, he must step down immediately. In the second, one needs to ask why such a far-reaching violation was not reported to the top and then things will get tough too."

Analysts had been hoping Winterkorn's victory in his power struggle with Piech would allow him to focus on tackling the carmaker's long-running underperformance in North America as well as sharply slowing demand in its main profit centre, China.

REUTERS