Daimler lends VW a hand to manage scandal clean up

October 20, 2015, 3:20 PM UTC
Dieter Zetsche, CEO of German auto giant Daimler AG, poses during the company's annual press conference in Stuttgart, southwestern Germany, on February 5, 2015. AFP PHOTO / THOMAS KIENZLE (Photo credit should read THOMAS KIENZLE/AFP/Getty Images)
Thomas Kienzle — AFP/Getty Images

Amid the turmoil swirling about Germany’s biggest automaker and private employer, Volkswagen AG has appointed one of its country’s most prominent jurists to its board of managers, the senior board of top executives.

Christine Hohmann-Dennhardt, 65, a former judge who sat on Daimler AG’s board, will be the first woman to serve on VW’s board of managers. Hohmann-Dennhardt assumes a newly-created post to oversee integrity and legal affairs on January 1. She also was the sole woman on Daimler AG’s board.

In what might seem an unusual gesture, Daimler released her more than a year early from her employment contract so she could go to work for the rival automaker. “Daimler is helping VW build rebuild trust in the German car industry,” Ferdinand Dudenhoeffer, director of the Center for Automotive Research at the University of Duisburg-Essen, told Reuters. “It’s an important step to help VW clean up the affair.”

Hohmann-Dennhard’s job will be to help VW and the entire German automobile industry “clean up the collateral damage from the diesel deceit,” he noted.

What’s unreported is whether the government played a part in her new role, due to VW’s importance as the nation’s top private employer.

Hohmann-Dennhardt’s appointment reflects the deep legal and economic agony that VW has created for the German nation since Sept. 18, when the U.S. Environmental Protection Agency accused the company of faking diesel emissions tests covering nearly 500,000 vehicles in the U.S. Subsequent disclosures by VW, which has confirmed the EPA’s accusations, says doctored tests affect 11 million vehicles worldwide.

In 2011, when Christine Hohmann-Dennhardt was appointed to Daimler’s board in the wake of a bribery scandal in the U.S., she told the press she personally (as opposed to her employer’s policy) was in favor of quotas in Germany to raise the number of women in management of corporations.

In recent years, so many corporations have brought in female leaders to clean up problems that researchers gave the trend a name: “the glass cliff.” It referred to the fact that women are often given leadership roles that carry a high risk of failure.

Her track record at Daimler

In 2010, Daimler paid a $185 million to the U.S. in the wake of a bribery scandal covering payoffs in foreign countries and investigated by the U.S. Securities and Exchange Commission and the Justice Department. An initial report by former FBI director Louis Freeh, who was hired to monitor Daimler, said the German automaker hadn’t made enough progress on compliance.

A year later, Dieter Zetsche, Daimler CEO, hired Hohmann-Dennhardt, who had just completed a term on Germany’s high court, to intensify efforts. She redesigned the company’s approach to compliance with anti-bribery rules and regulations, seeking to dispel an internal opinion that bribery was a “gentleman’s crime.” She held town meetings, oversaw enforcement and insisted on penalties, which included terminations and docking of pay.

Michael Horn, head of VW’s U.S. operations, testified before Congress that the bogus diesel testing activities were undertaken by a “small group” of company engineers – a statement that is certain to be subject to greater investigation and scrutiny. So far, VW has set aside $7.3 billion to cover the cost of repairing cars with improper emissions controls, though financial analysts estimate the number could grow manifold, when fines, damages and lost business are taken into account.

Was the cheating the work of a relative few? Hohmann-Dennhardt, a former justice minister for the left-center Social Democratic party before being appointed to Germany’s supreme court, appears poised to assume responsibility for VW’s investigation into the origins of emissions cheating and any potential housecleaning. As such, she may possess a license to follow the evidence wherever it takes her – perhaps to the highest levels of the company.

An earlier version of this story incorrectly reported that Dennhardt was the first female member of VW’s board of supervisors. Dennhardt is the first woman on VW’s board of managers. The story has been corrected. Fortune regrets the error.