By Andreas Cremer
BERLIN (Reuters) - Volkswagen (XETRA:VOWG) will name Matthias Mueller, the head of its Porsche sports car brand, as its chief executive as it tries to recover from a scandal over its rigging of U.S. vehicle emissions tests, a source close to the matter said.
Mueller, 62, has been widely tipped to succeed Martin Winterkorn, who quit on Wednesday, when the German carmaker's supervisory board meets on Friday, and will take responsibility for the biggest business crisis in Volkswagen's 78-year history.
Shares in the world's largest carmaker by sales have plunged as much as 40 percent since Friday, when U.S. regulators said it had admitted to cheating emissions tests on diesel cars.
VW also faces a battle to restore the confidence of customers and motor dealers who have expressed frustration at a lack of information from the company about how they will be affected by the scandal.
Mueller has a majority on the 20-member supervisory panel, the source said. Volkswagen declined to comment.
The board will also dismiss the head of the company's U.S. operations and top engineers at its Audi and Porsche brands, a senior source told Reuters, as it seeks a fresh start.
Mueller is a management board member of Porsche SE and so is close to the Piech-Porsche family that controls Volkswagen through the holding company. He also spent many years at Audi.
"He is a good choice even though he may be seen as a transitionary CEO until another internal candidate such as VW brand CEO Diess has earned their stripes," said Arndt Ellinghorst, an analyst at Evercore ISI investment banking advisory firm.
He said Mueller's priority would be renew VW's leadership, restructure costs and turn VW into a "performance-driven company" where management was more accountable."
VW said on Tuesday about 11 million of its cars worldwide were fitted with the software that was found to be cheating emissions in the United States. The U.S. Environmental Protection Agency has said Volkswagen could face penalties of up to $18 billion.
However, the crisis is still deepening. Germany's transport minister, Alexander Dobrindt, said on Thursday Volkswagen had manipulated tests in Europe as well as the United States.
Dobrindt told reporters vehicles with 1.6 and 2.0 liter diesel engines were" affected by the manipulations that are being talked about," but did not say how many were affected.
The company is under pressure to act decisively, with German Chancellor Angela Merkel urging it to quickly restore confidence in a business held up for generations as a paragon of German engineering prowess.
"There will be further personnel consequences in the next days and we are calling for those consequences," Volkswagen board member Olaf Lies told the Bavarian broadcasting network.
The research and development chiefs of Audi and Porsche, Ulrich Hackenberg and Wolfgang Hatz, will be removed by the supervisory board, as will Volkswagen's top executive in the United States, Michael Horn, the senior source told Reuters.
Hackenberg and Hatz had both held senior posts at VW in development, including of engines, before they switched to Audi and Porsche. They are among VW's highest-ranking engineers.
Horn acknowledged this week that the company had "totally screwed up" by deceiving U.S. regulators about how much its diesel cars pollute.
"DEFEAT DEVICES"
Regulators in Europe and Asia had already said they would investigate Volkswagen and other carmakers, and Volkswagen also faces criminal inquiries and lawsuits from cheated customers.
Italian prosecutors have opened a preliminary probe, a judicial source said, and the European Commission urged all member states on Thursday to investigate how many cars use the so-called "defeat devices" employed by Volkswagen to rig tests.
The scandal has sent shockwaves through the car market, with manufacturers fearing a drop in demand for diesel cars and tougher regulations and customers worrying about the performance and re-sale value of their cars.
Dobrindt said Europe would agree new emissions tests in coming months that should take place on roads, rather than in laboratories, and that random checks would be made on all manufacturers.
So far, no other carmaker has been found to have used "defeat devices." German rival BMW said on Thursday it had not manipulated emissions tests, after a magazine reported some of its diesel cars were found to exceed emissions standards.
DIESEL CAR DRIVERS WORRIED
Friday's board meeting had originally been due to extend the contract of Winterkorn and set out a new management structure.
Though Winterkorn oversaw a doubling in sales and a near tripling in profit in his eight year rein, he faced criticism for the company's underperformance in the United States and for a micro-managing style that critics say delayed model launches and hampered its ability to adapt to local markets.
Analysts said a new management structure, possibly more decentralized but also with a clearer system of checks, was all the more urgent, with top executives apparently unaware of the emissions test cheating despite a tight control on decisions.
The company has yet to announce which cars and construction years are affected, and whether they will have to be refitted.
A women at the reception desk of a Volkswagen dealership in Frankfurt, who declined to give her name, said she had received many queries from diesel car drivers.
"But we haven't got the ultimate answer because we haven't got much information from Volkswagen," she said.
Volkswagen said in a statement on its website it was working to answer these questions as quickly as possible. "It goes without saying that we will take full responsibility and cover costs for the necessary arrangements and measures," it said.
At 1515 GMT, the stock was up 0.2 percent at 111.8 euros following its decline in previous days.