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Volkswagen's U.S. Boss Suddenly Departs: What It Means

By John Rosevear – Mar 10, 2016 at 3:05PM

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VW said on Wednesday that U.S. chief Michael Horn had left the company, effective immediately. Horn had been the face of VW throughout the diesel emissions scandal, and he was popular with VW's dealers for his blunt, truth-telling style. What's this about?

Volkswagen announced on Wednesday that U.S. chief Michael Horn, shown here at a media event in 2015, abruptly left the company "by mutual agreement." Image source: Volkswagen.

In a surprise move, Volkswagen (VWAGY 1.31%) announced late Wednesday that Michael Horn, CEO of the VW brand's U.S. operation, has left the company by "mutual agreement."

In a statement announcing Horn's departure, VW global brand chief Herbert Diess thanked Horn for building a "strong relationship" with VW's U.S. dealers and for "exemplary leadership during difficult times for the brand."

His job will be filled on an interim basis by his boss, Hinrich Woebcken, who is the VW Group's North America chief.

Why this is a big deal: A 25-year VW veteran who took over the brand's top U.S. post early in 2014, Horn had been a prominent voice of Volkswagen here since the U.S. Environmental Protection Agency first charged the company with cheating on emissions tests last September.

In appearances before news media and congressional committees, Horn had repeatedly and bluntly acknowledged that VW had made major mistakes by incorporating software into its diesel-powered vehicles that produced false readings on government emissions tests. He apologized repeatedly to VW customers, even recording an online video to deliver the message.

Horn was well regarded by VW's U.S. dealers for his blunt, truth-telling style and for the steps he had taken throughout the crisis.

What his departure means: It's not yet clear why Horn left the company, though the wording of VW's statement suggests his departure may not have been entirely voluntary. It's very possible that his departure was engineered as part of VW's ongoing negotiations with the U.S. government over its diesel cheating scandal. It's also likely that VW's senior leadership blamed him in part for the brand's steep drop in U.S. sales since the scandal first broke.

The move wasn't popular with dealers. Several dealers interviewed by Automotive News and The Wall Street Journal late on Wednesday praised Horn highly. One group of U.S. VW dealers issued a statement praising Horn and calling his departure a "serious blow," while saying that there is "no sense of a resolution" to the diesel scandal forthcoming from Volkswagen headquarters in Germany.

Is VW setting Horn up to be the "fall guy" with the U.S. government?
That seems unlikely, or at least likely to lead to a big public fight: Horn has repeatedly and emphatically insisted that he had been unaware of the illegal software until shortly before the EPA's charges were announced. In an appearance before a U.S. House of Representatives panel last fall, he said that the decision to create and install the cheating software had been the work of a few individuals, not an organizational decision.

The general manager of a prominent U.S. Volkswagen dealership told Reuters that Horn had been offered other jobs within VW outside of the United States, but had declined them.

What's next from Volkswagen: VW is believed to be in the process of negotiating a settlement agreement with the U.S. government, one that could be announced before (or as part of) its 2015 earnings presentation that is now scheduled for late next month.

Developments in the last week or so have suggested that the two sides remain far apart. It's possible that Horn's departure from the U.S. was a concession to the Feds.

It's also possible that there's much more to the story that hasn't been made public yet. If so, it'll come out eventually. Stay tuned.

John Rosevear has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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