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Volkswagen Scandal: CEO Martin Winterkorn Steps Down, Calling for ‘Fresh Start’

The CEO of Volkswagen said Wednesday that he would step down as the company wrestles with a scandal over rigged emissions tests.

CEO Martin Winterkorn denied any personal wrongdoing but said the company needed “a fresh start.”

“I am shocked by the events of the past few days,” he said in a statement. “Above all, I am stunned that misconduct on such a scale was possible in the Volkswagen Group.”

Volkswagen has admitted that it rigged U.S. emissions tests to make it look as if its diesel-powered cars were emitting fewer nitrogen oxides, which can contribute to respiratory illness.

On Tuesday, the company said that 11 million of its diesel vehicles worldwide were fitted with same cheating software. American regulators had previously identified only 482,000 cars involved.

Winterkorn, 68, has been CEO for eight years. He accepted responsibility for “irregularities” in Volkswagen diesel engines.

“The process of clarification and transparency must continue,” he said. “This is the only way to win back trust. I am convinced that the Volkswagen Group and its team will overcome this grave crisis.”

Related: Q&A on the Volkswagen Emissions Scandal

The EPA has said that Volkswagen could face as much as $18 billion in fines. Other countries have ordered investigations, and some law firms have already filed class-action suits.

Tall, gruff and stern, Martin Winterkorn was precisely the sort of executive that Volkswagen AG favored, first and foremost an engineer. In this case, one who seemed readily capable of understanding even the most arcane technical details of every car within the vast VW empire of more than a dozen brands.

As the automaker’s one-time head of engineering, few who know Winterkorn or the VW way of doing business could imagine that the 68-year-old executive wasn’t at least peripherally aware of problems with its diesel emissions testing.

While not directly linked, Winterkorn stepped down ahead of this week’s VWAG board meeting.

"As CEO I accept responsibility for the irregularities that have been found in diesel engines and have therefore requested the Supervisory Board to agree on terminating my function as CEO of the Volkswagen Group," he said in a statement.

“I am doing this,” he added, “in the interests of the company even though I am not aware of any wrongdoing on my part."

Whether Winterkorn really didn’t know about VW’s efforts to secretly cheat on diesel emissions tests or not is likely to be one of the central issues in a variety of probes set to get underway around the world. Not only the EPA, but the U.S. Justice Department, are investigating. So are authorities in Germany and South Korea.

Almost by accident, federal authorities had learned that the automaker had installed sophisticated software – dubbed a “defeat device” – designed to detect when one of VW’s four-cylinder diesel models was undergoing emissions tests. In such a case, the car’s full pollution control technology would be activated. Otherwise, the controls would be scaled back, improving performance and fuel economy but allowing a vehicle to emit up to 40 times the maximum allowable emissions.

While the U.S. recall involves less than a half-million vehicles, Winterkorn earlier this week disclosed that about 11 million sold worldwide contain the suspect software. Apparently, it is now active in many markets because they do not have as stiff restrictions on diesel emissions as the U.S.

VW has already set aside $7.3 billion to cover the cost of updating or replacing the vehicles covered by the U.S. recall and related expenses. But it faces a potential of $18 billion in fines from the EPA alone. The Justice Department could also levy penalties, as it has done against General Motors and Toyota over the last 18 months.

Meanwhile, there is also the possibility of criminal prosecution of individuals who might be blamed for actively trying to defraud regulators and consumers.

The scandal and resignation, meanwhile, are only likely to shake things up at a time when VW expected to be celebrating. Under Winterkorn, the German maker had aggressively sought to expand its global presence. And though he originally expected to reach the goal by 2018, it ended the first half of this year as the world’s best-selling automaker.

The VW board’s executive committee said in a statement that the maker’s recent success "is inextricably linked to his name,” crediting Winterkorn "for towering contributions in the past decades and for his willingness to take responsibility in this critical phase for the company."

The company planned to name a successor at its board meeting Friday.