Senior Audi engineer is arrested over diesel scandal

On Wednesday, German prosecutors said they had arrested a second employee of the luxury carmaker Audi, which belongs to VW, and is also involved in its emissions cheating scandal.

The charge marks the most concrete reminder the crisis is far from over and undermines Volkswagen's efforts to look forward with aggressive plans to roll out a lineup of affordable electric cars in the coming years.

Public prosecutors have taken former Volkswagen Group powertrain development director Wolfgang Hatz into custody in Germany over the Dieselgate fraud scandal.

German media claim the person is Wolfgang Hatz, who stepped down from his post on Porsche's management board previous year after being suspended over the "dieselgate" investigation. However there has been no official confirmation of his identity. So the brands lose a champion on that front, while other high-ranking VW Group executives with suspected ties to the diesel scandal likely won't be sleeping well for the foreseeable future. Investigations found no evidence against him, Porsche said in May 2016.

Hatz's arrest reveals that Volkswagen's political capital seems to have run out, despite its being partly owned by the German state of Lower Saxony. "Pamio remains in custody pending ongoing German investigations and an extradition request by USA authorities".

Coinciding with the latest charge against the manufacturer over the emissions cheating scandal saw their shares dip by three per cent.

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The new charge comes 15 months after Volkswagen and USA regulators and law enforcement agencies agreed on a program by which the company agreed to buy back or fix about 50,000 Volkswagen and Audi models.

"This is yet another unexpected and unwelcome announcement from VW, not only from an earnings and cash flow perspective but also with respect to the credibility of management", said Evercore ISI analyst Arndt Ellinghorst.

Europe's biggest automaker admitted in September 2015 that it had used illegal software to cheat USA diesel emissions tests.

Since then the firm has been adapting its cars to meet legal requirements. The company's best-selling vehicle in the United States is the Golf SportWagen, which posted an 88% gain in August and a gain of 168% for the year to date. According to a recent Automotive News report from the US, Audi has said it has no knowledge of the arrest but that it is continuing to cooperate with authorities.

Volkswagen will release its third-quarter earnings on October 27.

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