Two major luxury automakers — Audi and Tesla — are scrambling to minimize the fallout from separate public relations crises within their respective companies.
Today Ingolstadt, Germany-based carmaker Audi has replaced its arrested chief executive officer, Rupert Stadler, who was taken into custody June 18 by German authorities. It was the same day Tesla CEO Elon Musk accused one of his company’s employees of major sabotage.
Audi CEO Rupert Stadler was suspended following his arrest related to a company emissions cheating scandal.
Stadler, 55, has been with Audi’s parent company Volkswagen since 1990 and led Audi until his arrest yesterday on charges stemming from an emissions cheating scandal. Prosecutors in Munich said Stadler was jailed because of concerns he may improperly influence witnesses in a criminal fraud investigation against 20 Audi employees, himself included.
The investigation relates to a scheme by the carmaker to place emissions test cheating software in millions of diesel vehicles sold in Europe and the United States.
An emissions test cheating scandal has cost Audi parent company Volkswagen more than $30 billion to date.
The software allowed the car’s computer to recognize when it was being tested and click on its full emissions controls. Whenever the car was not being tested, these controls were reduced to allow for significantly heightened engine performance while emitting 40 times the legal limit of nitrous oxide.
Elevated levels of the gas in the atmosphere can lead to asthma and respiratory problems. An estimated 59 premature deaths were caused by the Volkswagen cheating software, according to research by the scientific journal Environmental Research Letters.
Former Volkswagen CEO Martin Winterkorn — who resigned when the scandal was made public in 2015 — was indicted by the United States Department of Justice in May on charges related to the case.
An Audi statement said Stadler requested to be removed from the position pending the outcome of the investigation and stressed that the company considers the CEO to be innocent of all charges unless proven otherwise in court. Sales executive Abraham Schot was named to fill the role on an interim basis.
The scandal already has cost Volkswagen more than $30 billion in fines, settlements and recalls. Shares in the company dropped 3 percent on Tuesday, following news of Stadler’s arrest and suspension.
On the other side of the world, Palo Alto, California-based Tesla Inc. is facing troubles of a very different sort. The company is pressing to increase production of its Model 3 to 5,000 units per week by mid-July, the rate CEO Elon Musk says Tesla needs to maintain to become profitable.
Musk sent a companywide email on Monday, claiming that a Tesla employee seriously had sabotaged production by corrupting the manufacturing operating system’s computer code.
Tesla CEO Elon Musk is facing multiple challenges in 2018, including an alleged case of sabotage by an employee. (Photo: Brian Solis)
“The full extent of (the unnamed employee’s) actions are not yet clear, but what he has admitted to so far is pretty bad,” wrote Musk. “His stated motivation is that he wanted a promotion that he did not receive. In light of these actions, not promoting him was definitely the right move.”
Musk went on to say it is not clear if the employee was acting alone and that an extensive internal investigation was ongoing.
“As you know, there are a long list of organizations that want Tesla to die,” he wrote. “These include Wall Street short-sellers, who have already lost billions of dollars and stand to lose a lot more.
“Then there are the oil and gas companies, the wealthiest industry in the world. They don’t love the idea of Tesla advancing the progress of solar power and electric cars. Don’t want to blow your mind, but rumor has it that those companies are sometimes not super nice.”
The email also claimed the employee delivered a wealth of sensitive company information to another unnamed entity.
Tesla is struggling to boost production goals for its Model 3, critical to making the company profitable.
On Monday, work at the production facility in Fremont, California, was slowed temporarily by a small fire. No injured were reported, and damage was minimal.
Tesla is facing what could become an existential crisis as it struggles to produce the Model 3, an electric car priced starting at $35,000, in sufficient numbers to repay a $1.15 billion bond due fully in March 2019.
The company failed to meet production goals for the Model 3 in the fourth quarter of 2017 and again in the first quarter of this year. It had to recall 123,000 units of the Model S in March due to power-steering system issues.
The same month, a driver of the Model X — 38-year-old Apple engineer Walter Huang — was killed in a crash in Mountain View, California, while the vehicle was in semi-autonomous Autopilot mode. Tesla blamed Huang for the accident. The National Transportation Safety Board launched an investigation that is expected to continue for a year or more.
Tesla shares fell 5 percent on Tuesday.
