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 The executive committee of the German carmaker's supervisory board
will gather on Wednesday evening at its Wolfsburg headquarters to
assess the initial results of the internal inquiry into the biggest
business-related scandal of its 78-year history, said the source,
speaking on condition of anonymity.
A representative of U.S. law firm Jones Day, which is expected to
lead the external investigation, will attend part of Wednesday's
meeting, the source added.
Europe's largest carmaker has admitted cheating in diesel emissions
tests in the United States. Germany's transport minister says it
also manipulated tests in Europe, where Volkswagen sells about 40
percent of its vehicles.
It is under huge pressure to come to grips with a crisis that has
wiped more than a third off its market value, sent shock waves
through the global auto industry and could damage Germany's economy.
New Chief Executive Matthias Mueller, who took over from Martin
Winterkorn last Friday, has promised to punish those responsible and
to create a new business culture.
 Winterkorn, CEO for almost nine years, is being investigated by
German prosecutors over allegations of fraud.
Investors view an external probe as particularly important, given
the close links of Mueller and chairman-designate Hans Dieter
Poetsch to the Piech-Porsche clan that controls the carmaker.
Influential German newspaper Handelsblatt reported on Wednesday that
some investors were calling for Poetsch to stand aside. However, a
source close to the Piech and Porsche families told Reuters they
strongly supported Poetsch becoming chairman.
Shareholder advisory firm Hermes EOS said on Monday it had "real
doubts" about Volkswagen's decision to appoint company insiders to
top jobs to tackle the crisis.
MANAGEMENT FOCUS
Volkswagen said on Tuesday it would refit up to 11 million vehicles
installed with the "cheat" software in one of the biggest such
recalls by a single automaker.
It has promised to submit details to regulators next month, with
customers anxious to know whether the mileage and efficiency of
their vehicles will be affected.
The carmaker's Czech division Skoda has informed the government
there that it will need until the end of October to find a technical
solution to the problem. Around 1.2 million Skoda vehicles are
affected.
Manipulating emissions results allowed Volkswagen to keep down
engine costs in a "clean diesel" strategy that was popular in Europe
and at the heart of a drive to improve U.S. results.
The source familiar with the matter told Reuters an engineer
questioned in the company's internal probe had warned of illegal
practices in emissions measurement as far back as 2011, but that no
action was taken.
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On top of its own inquiries, Volkswagen faces investigations by
regulators and prosecutors across the world, plus potential lawsuits
from customers, investors and environmentalists.
Some analysts are concerned that management will be so preoccupied
with the crisis that they will not have enough time to focus on
rebuilding the brand and tackling long-standing areas of
underperformance, such as the mass-market VW division, flagging
sales in China and a struggling U.S. business.
In a sign of the potential impact of the scandal, a car valuation
tracking guide on Wednesday said the value of used Volkswagen diesel
cars sold in Britain trailed the wider market in September.
Industry publication Green Car Journal also said on Tuesday it was
rescinding "Green Car of the Year" awards given to Volkswagen's 2009
VW Jetta TDI and 2010 Audi A3 TDI models.
However, Skoda said it had not seen any impact on sales or orders
since the crisis erupted, and analysts said a halving in sales tax
on small cars in China could provide a boost to Volkswagen.
At 0920 GMT, Volkswagen shares were up 2.7 percent at 97.75 euros.
The company's troubles have been an embarrassment for Germany, which
has for years held up Volkswagen as a model of its engineering
prowess and has lobbied against some tighter regulations on
automakers. The German car industry employs more than 750,000 people
and is a major source of export income.
German Finance Minister Wolfgang Schaeuble said on Wednesday the
crisis did not pose a danger to the country's economy, Europe's
largest, but added: "In the end, VW will not be the same company it
once was. A lot will change from a structural perspective."
Car manufacturers are worried the crisis could lead to more costly
regulations and hit sales of diesel cars.
(Additional reporting by Reuters bureaus in Europe. Writing by Mark
Potter; Editing by Gareth Jones)
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