Audi to name interim CEO after Stadler arrest, report says

A judge in Germany has ordered that Rupert Stadler be remanded in custody to prevent him from obstructing or hindering the diesel investigation, prosecutors said.

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FRANKFURT -- Audi will appoint an interim CEO after current boss Rupert Stadler was arrested on Monday, Germany's Frankfurter Allgemeine Zeitung reported without citing sources.

The appointment will be made at a supervisory board meeting convened on short notice on Monday, the newspaper said.

Munich prosecutors, who earlier this month widened their diesel-emissions probe into Audi, said earlier that Stadler was being held due to fears he might hinder their investigation into the scandal, plunging Volkswagen into a leadership crisis.

Stadler was arrested by German authorities early on Monday and is the highest ranking Volkswagen Group official so far to be detained over the automaker's emissions-cheating scandal.

News of the arrest comes as VW Group’s new CEO, Herbert Diess, is trying to introduce a new leadership structure, which includes Stadler, to speed up a shift toward electric vehicles in the wake of the company's emissions troubles.

"His arrest is another low point in VW's diesel saga," said Evercore ISI analysts, who have criticized the company for being slow to reform. "Almost three years after the diesel scandal broke, it takes police to take action against the Audi CEO."

VW Group admitted in September 2015 to using illegal software to cheat U.S. emissions tests on diesel engines, sparking the biggest crisis in the company's history and leading to a regulatory crackdown across the auto industry.

The U.S. filed criminal charges against former VW Group CEO Martin Winterkorn in May, but he is unlikely to face U.S. authorities because Germany does not extradite its nationals to countries outside the European Union. The Munich prosecutors said Stadler's arrest was not made at the behest of U.S. authorities.

The executive was arrested at his home in Ingolstadt in the early hours on Monday, they said. "As part of an investigation into diesel affairs and Audi engines, the Munich prosecutor's office executed an arrest warrant against Professor Rupert Stadler on June 18, 2018," the prosecutor's office said in a statement. A judge in Germany has ordered that Stadler be remanded in custody, it said, to prevent him from obstructing or hindering the diesel investigation.

Audi and VW confirmed the arrest and reiterated Stadler was presumed innocent unless proved otherwise. Stadler himself was not immediately available for comment.

Under fire

Stadler has been under fire since Audi admitted in November 2015 -- two months after parent VW -- that it also installed illegal "defeat device" software to cheat U.S. emissions tests.

Munich prosecutors are investigating whether Stadler acted swiftly enough to stop deliveries of manipulated Audi models in Europe once emissions problems had emerged, a person familiar with the matter has told Reuters.

Stadler has held onto his post mainly because of backing from members of VW's controlling Porsche-Piech families. Before becoming Audi CEO in 2007, Stadler worked as chief of staff to VW's former Chairman, Ferdinand Piech.

Earlier this month, Munich prosecutors widened their probe at Audi to include Stadler and another member of Audi's top management, investigating them for suspected fraud and false advertising.

Stadler's arrest will raise tensions on VW's supervisory board, putting at risk a fragile truce between management, labor representatives and board members from the automaker's home region of Lower Saxony.

A spokesman for Porsche SE, the company that controls VW and Audi, said Stadler's arrest would be discussed at supervisory board meetings of both VW and Audi on Monday.

VW has so far set aside about $30 billion to cover the cost of fines, vehicle refits and lawsuits related to its emissions-test cheating. Most of its problems have been in the U.S., where a total of nine people have been charged and two former VW executives have pleaded guilty and been sentenced to prison terms. But investigations are continuing elsewhere. Last week, German prosecutors fined VW 1 billion euros ($1.2 billion) over the scandal.

The Munich public prosecutor's office said last week it was investigating 20 suspects, and that it had searched the apartment of Stadler and one other current board member.

The second suspect is Bernd Martens, Audi's head of purchasing, according to a person familiar with the investigation who declined to be identified because prosecutors hadn't disclosed the name, Reuters reported. Martens led a diesel task force at Audi, which was set up to coordinate the handling of the crisis with the parent company.

Automotive News Europe contributed to this report