Probes and lawsuits pile up as Volkswagen starts to react

October 2, 2015, 4:08 PM UTC

France and Italy have become the latest countries to open inquiries into manipulation of emissions data by Volkswagen AG (VLKPY), adding new headaches for the German giant as it tries to get its response to the spreading scandal into gear.

French prosecutors are looking at the possibility of “aggravated deception” according to Reuters, while Italy’s antitrust body has also started a probe based on suspicions of fraud. The two new lines of investigation add to the lawsuits piling up in the U.S. against the carmaker, which has admitted installing software to mask the true level of harmful emissions made by an older generation of diesel engines. Over 11 million vehicles worldwide are affected, of which nearly 500,000 are in the U.S..

The company is already facing two criminal probes in Germany, launched by prosecutors in the home regions of its VW and Audi brands. Contrary to earlier reports, the probe launched by state prosecutors in Lower Saxony, where the company is based, is not concentrating principally on the person of Martin Winterkorn, who resigned last week as chief executive. Meanwhile in the U.S., its country head Michael Horn will go in front of a Congressional committee next week to answer questions about the scandal.

VW’s board late Thursday announced a fresh set of measures aimed at placating both the authorities and the company’s investors, including the appointment of U.S. law firm Jones Day to head an external inquiry into “all relevant matters”.

Jones Day’s inquiry, like the recall action that VW is planning, is likely to take “several months”, according to the German company.

In an olive branch to outside shareholders who have complained about the influence of the founding Porsche family over the company, VW said Julia Kuhn-Piëch, a niece of ex-chairman Ferdinand Piëch, will step down from the board.

However, there is no sign yet of the company handing over any real management or supevisory influence to outsiders. It has already appointed on company veteran, Matthias Müller, to take over from Winterkorn as CEO. On Thursday, it confirmed that Hans Dieter Pötsch, the former chief financial officer, would join the supervisory board as planned, and said “it is then intended” the Pötsch become board chairman.

The intention to promote Pötsch, a long-time company insider, is controversial. Many suspect that Pötsch, along with other members of the group’s management board, may have had knowledge of the cheating, after a week of leaks suggesting that the company received numerous warnings about the practice, including from employees, from the European Commission, and from Robert Bosch, the company that supplied the software.

On Thursday, the board also appointed Frank Witter, head of the in-house bank Volkswagen Financial Services, to the group board, in a move that underlines the importance of VFS to the group’s bottom line. VFS has traditionally been able to borrow money at ultra-low rates through the asset-backed securities market, which it then uses to offer cheap loans to its customers. It had €37 billion in bonds outstanding at the end of last year. But VFS’s credit rating is now under threat, raising the risk of a sharp rise in the group’s borrowing costs.