Audi chief arrested in Germany over diesel scandal

Volkswagen was holding crisis talks on Monday to find a stand-in boss for its Audi brand, a source familiar with the discussions said, after German authorities arrested Audi CEO Rupert Stadler as part of a probe into emissions test cheating.

Stadler is the most senior company official to be detained so far since Volkswagen (VW) admitted in September 2015 to using illegal software to rig U.S. emissions tests on diesel engines.

Munich prosecutors, who widened their probe into Audi earlier this month, said Stadler was being held due to fears he might hinder their investigation into the scandal, plunging VW into a leadership crisis, Reuters reports.

“We need to find a solution for Audi’s leadership for the time when he is not here,” the source familiar with the talks said about Stadler’s position. “We will comment on this later.”

VW and Audi directors were discussing the leadership crisis in separate meetings on Monday.

VW has set aside around $30 billion to cover fines, vehicle refits and lawsuits since its “dieselgate” scandal broke, and has announced plans to spend billions more on a shift to electric vehicles as it seeks to rebuild its reputation.

Whereas group CEO Martin Winterkorn resigned in the days after the cheating was disclosed, Stadler has remained in post and was this year promoted by new VW boss Herbert Diess in an overhaul aimed at speeding up the group’s reforms.

“His arrest is another low point in VW’s diesel saga,” said Evercore ISI analysts, who have criticized the group for a slow pace of reform. “Almost three years after the diesel scandal broke, it takes police to take action against the Audi CEO.”

The United States filed criminal charges against Winterkorn in May, but he is unlikely to face US authorities because Germany does not extradite its nationals to countries outside the European Union.

The Munich prosecutors said the move against Stadler was not made at the behest of U.S. authorities. The 55-year-old was arrested at his home in Ingolstadt in the early hours on Monday, they said.

“There were clear signs that there was to be an effort to influence people and other suspects. Therefore we issued an immediate arrest warrant,” Stephan Necknig, a spokesman for the Munich prosecutor’s office, told German tabloid Bild, explaining the reasons for Stadler’s arrest.

Audi and VW said Stadler was presumed innocent unless proved otherwise. Stadler himself was not immediately available for comment.

At 1325 GMT, VW shares were down 3.6 percent at 155.30 euros, one of the biggest falls by a European blue-chip stock .FTEU3.