POAHY Porsche Automobile Holding SE (PK)

Volkswagen AG's supervisory board assembled Friday for a meeting that could run until evening to anoint a new chief executive, shake up the senior management team and begin repairing damage from a massive scandal that has erased almost one-third of the company's market value.

The 20-member board appeared poised to name Matthias Mü ller, the head of Volkswagen's Porsche sports-car unit, as the replacement for Martin Winterkorn, according to people familiar with the situation.

Mr. Winterkorn resigned Wednesday after the German company admitted that up to 11 million cars could be affected by Volkswagen's efforts to deliberately circumvent environmental regulations. Wolfsburg-based Volkswagen now faces the prospect of multibillion-dollar financial penalties, massive costs for fixing or replacing affected cars, and lawsuits.

Mr. Mü ller, a long-serving employee of the Volkswagen group, would oversee a sprawling empire with €200 billion ($225 billion) in sales that produces models including inexpensive Czech-made Skoda cars, its world-known VW models, as well as luxury vehicles from Audi, Bentley and Bugatti. It also makes Ducati motorcycles and Scania trucks.

Volkswagen's sheer size—the group employs 600,000 people world-wide and has acknowledged 11 million cars could be affected by the emissions problem—shows the extent of the challenge that the supervisory board faces, not least in demonstrating Volkswagen can make a clean break from its past.

"Today's supervisory board meeting is of enormous importance as a first step to clean up at Volkswagen," said Professor Ferdinand Dudenhö ffer, head of the Center Automotive Research at University Duisburg-Essen in western Germany. "Further steps have to follow and Volkswagen needs a new supervisory board chairman from outside."

The newly named chairman, appointed early this month, is the group's current finance chief, Hans Dieter Pö tsch. Mr. Pö tsch, an Austrian, is well respected in investment circles and understands the company deeply. He has been a member of VW's management board since 2003.

"Volkswagen needs to think big and bold," said Bernstein Research analyst Max Warbuton. One idea he proposes would be an offer to buy back and scrap the incriminated diesel cars sold in the U.S. as part of a charm offensive with government, regulators, and the media.

With environmental campaigners protesting outside Volkswagen's headquarters on Friday, coming clean on the emissions scandal is one priority, analysts say.

Details are so far scarce on how many people were involved in installing so-called "defeat devices" on nearly half a million diesel-powered cars in the U.S. Volkswagen has said only that it is demanding resignations from some top engineers. Mr. Winterkorn denied any knowledge of the test-cheating software.

The emissions crisis has exposed Volkswagen's cumbersome corporate governance. Volkswagen officials have acknowledged the company knew about the U.S. emissions-test problem for months. U.S. regulators accused it of stonewalling.

The auto maker is controlled by the Porsche and Pië ch families, the descendants of Beetle-inventor Wolfgang Porsche. The German state of Lower Saxony has a blocking 20% minority stake. The other major owner of voting stock is the Persian Gulf emirate of Qatar.

Analysts have long noted that the ownership structure limits change. Lower Saxony's blocking vote and Volkswagen's position as the state's biggest employer mean the state has a clear interest in protecting jobs at the company.

Notably absent from Friday's meeting is Ferdinand Pië ch, who was forced in April to resign as chairman following a failed attempt to oust Mr. Winterkorn. Mr. Mü ller is understood to be close to the Porsche and Pië ch families.

Other senior members of the board include: IG Metall Deputy Chairman Berthold Huber—a sign of organized labor's important role in German corporate governance; Qatar Minister of State and CEO of Qatar Airways Akbar Al Bakar; Lower Saxony's Minister of Economic Affairs Olaf Lies; and Annika Falkengren, CEO of Swedish bank Skandinaviska Enskilda Banken AB and one of four women on the board.

Friedrich Geiger contributed to this article

Write to Matthew Curtin at matthew.curtin@wsj.com

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(END) Dow Jones Newswires

September 25, 2015 08:35 ET (12:35 GMT)

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