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 The investigation into Winterkorn, who quit on Wednesday after
almost nine years at the helm of Europe's largest carmaker, is into
"allegations of fraud in the sale of cars with manipulated emissions
data," the prosecutor's office said.
Volkswagen, which has admitted to cheating diesel emissions tests in
the United States, is under huge pressure to get to grips with the
biggest business scandal in its 78-year history.
It named company veteran Matthias Mueller on Friday as chief
executive and agreed to appoint a U.S. law firm to conduct a full
investigation.
Sources familiar with the matter said on Monday it had also
suspended the heads of research and development at its core VW
brand, luxury division Audi and sports car maker Porsche.
But the crisis shows no sign of dying down.
 Two German newspapers said on Sunday Volkswagen's own staff and one
of its suppliers had warned years ago about the illegal use of
so-called "defeat devices" to detect when a car was being tested and
alter the running of its diesel engine to conceal their emissions of
toxic nitrogen oxides.
Environmental campaign group Transport & Environment (T&E) published
new data on Monday showing that some new Mercedes, BMW and Peugeot
cars use 50 percent more fuel than laboratory tests show, saying
this was evidence of a wider industry problem.
T&E, which works closely with the European Commission, said its data
did not prove other firms were using defeat devices.
But it said the gap between lab results and road performance had
grown to such an extent for emissions of both carbon dioxide and
nitrogen oxides that further investigation was needed to discover
what carmakers were doing to mask emissions.
"The Volkswagen scandal was just the tip of the iceberg," said Greg
Archer, clean vehicles manager at T&E, adding the gap between lab
tests and real-world performance cost a typical driver 450 euros
($504) per year.
ACEA, the European Automobile Manufacturers' Association, which
represents top carmakers, has said there is no evidence the use of
defeat devices is an industry-wide issue.
In a statement on Monday, it said it supported the development of
updated testing.
U.S. and European regulators have said they are working on tighter
rules.
THE RIGHT CHOICE?
Volkswagen shares have plunged about 35 percent since it admitted to
cheating U.S. emissions tests, wiping more than 25 billion euros
from its market value. It faces investigations and potential fines
from regulators and prosecutors, as well as lawsuits from cheated
customers.
 The crisis is an embarrassment for Germany, which has for years held
up Volkswagen as a model of the country's engineering prowess and
has lobbied against some attempts to tighten regulations on
automakers.
The German car industry employs more than 750,000 people and is a
major source of export income.
The scandal has also rocked the wider car market, with manufacturers
fearing a drop in diesel car sales and more costly regulations, and
customers furious that Volkswagen has not given more details about
what might happen to their cars.
The company has said 11 million cars worldwide had defeat devices
installed. On Monday, Audi said 2.1 million of these were its own
models, including the A1, A3, A4, A5, A6, TT, Q3 and Q5.
But it has still not said whether the affected models would have to
be recalled and refitted.
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"VW is in a dramatic situation. It will be far from easy to restore
the reputation of the company and win back trust from customers,"
new CEO Mueller, a former boss of Porsche sports-cars, said in a
letter to the division's staff seen by Reuters.
Some analysts question whether he is the right man for the job,
given his more than three decades at the company.
"It seems that VW has known for years about these manipulations. It
badly needs a new company culture but Mueller is anything but a
perfect pick to drive change," said Commerzbank's Sascha Gommel. "He
has made a career within the VW system, so how could he credibly
argue that all will change to the better now? Those doubts are
weighing on the stock."
Shareholder advisory firm Hermes EOS said it was also concerned
about the appointment of "corporate insiders" to top jobs as
Volkswagen reshuffles its management.
At 1115 GMT, Volkswagen shares were down 6.9 percent at 107.60
euros.
Sources close to the matter told Reuters on Monday the company had
suspended VW brand development chief Heinz-Jakob Neusser; Audi's R&D
boss Ulrich Hackenberg, who also oversees technical development
across the group; and Porsche's Wolfgang Hatz, also head of group
engine and transmissions development.
One source said Hackenberg was taking legal action against the
decision. Volkswagen and Audi declined to comment, while the
suspended executives could not immediately be reached.
Switzerland said on Friday it was banning sales of Volkswagen cars
affected by the scandal, while the company's Italian arm has also
told dealers to stop selling them, Italy's Corriera della Sera
newspaper reported on Sunday.
Independent Polish car brokerage North Invest said on Monday it
would stop selling Volkswagen cars with 2.0 TDI engines until the
company sorted out its problems.
Diesel engines use less fuel and emit less carbon - blamed for
global warming - than standard gasoline engines. But they emit
higher levels of toxic nitrogen oxides, blamed for deaths from lung
and heart disease.
In most of the world, including the United States, diesel engines in
passenger cars are a niche product. But their fuel economy and low
carbon emissions have made them popular in Europe, where they now
account for half of vehicles sold.
Volkswagen and other European manufacturers have promoted "clean
diesel" technology, benefiting from diesel's fuel economy but
meeting stringent tests for emissions of toxins. The suggestion that
this was achieved by cheating on tests could affect the viability of
the entire diesel sector.
(Additional reporting by Reuters bureaus in Europe; Writing by Mark
Potter; editing by Janet McBride)
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