Loss Of US Boss Seen Slowing Volkswagen Turnaround, But Not Talks With Regulators

The departure of Volkswagen's U.S. boss is a blow to the carmaker's attempts to revive sales after its emissions test cheating scandal, but should not disrupt its efforts to strike a deal with U.S. regulators, analysts and sources told Reuters.

Michael Horn, whose surprise departure from the helm of Volkswagen Group of America was announced late on Wednesday, was not on the teams negotiating with U.S. regulators over a fix for almost 600,000 vehicles found to be emitting up for 40 times the legal limit of pollutants, sources close to the matter said.

But he was a popular figure among U.S. dealers, who viewed him as critical to the German company's attempts to win back customers in the world's second-biggest car market.

The U.S. National Automobile Dealers Association on Thursday called Horn's departure "regrettable," and called on Volkswagen Chief Executive Matthias Mueller and VW brand chief Herbert Diess to meet with the brand's U.S. dealers in Las Vegas next month.

"VW has its back to the wall, Horn's departure is happening at the most inconvenient time," said Arndt Ellinghorst, an analyst at banking advisory firm Evercore ISI. "If such a key figure quits, this will inevitably cause more unrest."

Almost six months after it admitted to installing test-rigging software, Europe's largest carmaker has still to reach an agreement with U.S. regulators on how to fix affected cars.

A federal judge has set a March 24 deadline for it to say whether it has found a fix acceptable to the authorities.

VW also faces mounting legal action - the U.S. Justice Department sued the company in January for up to $46 billion for violating environmental laws and this week sent VW a civil subpoena under a bank fraud law.

And its sales in the United States are sliding.

VW said on Wednesday Hinrich Woebcken, a former BMW (BMWG.DE) manager set to take the helm of VW's core brand in North America next month, would assume Horn's responsibilities on an interim basis.

Three sources at VW's Wolfsburg headquarters said Woebcken's appointment to the North American job may have been a factor behind Horn's departure - which VW said was a mutual decision.

Horn's resignation marks the second blow in five months to VW's efforts to assemble a management team for North America after former Skoda boss Winfried Vahland last October rejected an offer to run the VW brand there.

VW is also still looking for a senior figure to help it deal with U.S. authorities after an aborted attempt to hire ex-FBI chief Louis Freeh for that role, one of the sources said.

"VW is in a bind and it's anything but helpful to have a vacuum at the top level" of its U.S. management, said Commerzbank analyst Sascha Gommel, who has his rating on VW shares under review.

VW sources told Reuters on Thursday it planned to cut 3,000 office jobs in Germany by the end of next year.

Horn was criticised by U.S. lawmakers in October for blaming VW's test cheating on "a couple of software engineers."

He said he knew in the spring of 2014 the company might be breaking U.S. emissions rules, but that he did not know about the use of illegal "defeat device" software until about Sept. 3, 2015, when VW admitted cheating to U.S. regulators.