POAHY Porsche Automobile Holding SE (PK)

By Natascha Divac 

BERLIN-- Volkswagen AG shares took a fresh tumble on Tuesday, falling as much as 5% on the Frankfurt Stock Exchange, after U.S. environmental authorities lodged fresh allegations of emissions cheating.

This time the charges hit Porsche, VW's sports car brand and big profit center, and for the first time raises the question whether new CEO Matthias Müller, former Porsche chief, knew about engines at Volkswagen's top-flight brands that were allegedly tuned to game emissions tests.

The U.S. Environmental Protection Agency said Monday that it found so-called defeat devices on 3.0 liter diesel engines used in larger Volkswagen sport-utility vehicles such as its Touraeg, Porsche's Cayenne, Audi's Q5 and Q7, as well as Audi's A6 and A8 luxury sedans.

Volkswagen dismissed the EPA allegations, saying it didn't install any emissions-cheating software on the engines used in these vehicles. A spokesman said any discussion about consequences from the EPA allegations is irrelevant because the company insists it did nothing wrong.

What rattled investors when European stock markets opened on Tuesday was concern that the new allegations could threaten Mr. Müller just over a month after he took charge in the wake of Volkswagen's admission that it had cheated on emissions tests by using a so-called defeat device on up to 11 million small and midsize diesel-powered cars.

That admission led to the resignation of Martin Winterkorn, the former CEO, and catapulted Mr. Müller from head of Porsche AG to chief of the entire Volkswagen group. Now, analysts are asking whether an insider like Mr. Müller is the right person to lead Volkswagen out of the worst crisis in the company's 78-year history.

"The allegations are all the more serious given that VW's new CEO Matthias Müller came from Porsche and any hint of further deception could well see his position come under scrutiny," said Michael Hewson, chief market analyst at CMC Markets, a brokerage.

Volkswagen's shares fell sharply during early morning trade, but recovered by late afternoon when shares were trading at EUR109.46, up 0.6%.

Mr. Müller became head of Porsche in 2010. A veteran insider, he was a protégé of Mr. Winterkorn and well-liked by the Porsche-Piech clan that controls Volkswagen's voting stock. He oversaw Volkswagen group product planning from 2007 to 2010.

"I was astonished that Porsche's Matthias Müller was appointed CEO of VW," said David Buik, a market commentator at Panmure Gordon. "There was always a chance that Porsche and Audi would be directly or indirectly involved in the diesel saga."

Volkswagen's diesel woes have kept investors on edge, but seem to have little impact on German consumers. Germany's motor vehicle agency reported Tuesday that registrations of new diesel-powered cars rose 6% in October.

"Diesel is a key technology for us," said Harald Krüger, BMW AG chief executive, during an earnings call with analysts on Tuesday. "At the moment, we are seeing no impact on sales from the diesel issue, but I must add that it is still early days."

Write to William Boston at william.boston@wsj.com

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(END) Dow Jones Newswires

November 03, 2015 09:18 ET (14:18 GMT)

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