Business

Harley-Davidson Inc. on Monday said it would move US production of motorcycles for European Union customers overseas to avoid retaliatory tariffs that could cost the company up to $100 million per year. Harley shares plunged as much as 7 per cent and analysts cut their profit forecasts on concerns about how quickly the company would be able to adapt to the 25 per cent import duties the European Union began charging on June 22.

US President Donald Trump has held up Harley as an example of a manufacturer that would benefit from his policies. But the proposed production shift appeared to mark an unintended consequence of US tariffs imposed on European steel and aluminum earlier this month.

"We think Harley's decision to protect EU demand is wise for the long-term health of the market," Baird Equity Research said in a note. "But we expect the near-term impact to weigh on estimates and sentiment until a clearer path to mitigation is outlined."

In a regulatory filing, the Milwaukee, Wisconsin-based company said the retaliatory duties would result in an incremental cost of about $2,200 per average motorcycle exported from the United States to the European Union, but did not provide more details on current motorcycle costs.

Harley's entry-level bike in France currently costs 7,490 euros ($8,766). The company said it would not raise retail or wholesale prices for its dealers, and expects the tariffs to result in incremental costs of $30 million to $45 million for the rest of 2018 and $80 million to $100 million on a full-year basis.

Trump vowed to make the iconic motorcycle maker great again when he took office last year. But since then the company has been counting the costs of his trade policies. 

In late April, Harley said Trump's metal tariffs would inflate its costs by $15 million to $20 million this year on top of already rising raw material prices that it expected at the start of the year.

White House trade and manufacturing adviser Peter Navarro said on Monday the administration wants Harley to make more motorcycles in the United States. 

"Remember, they came to us, for example, pointing out that India had a 100 per cent tariff on Harley Davidsons. That's certainly not fair," Navarro told CNBC.

"We want Harleys made here, more made here, and that's going to happen under the president's trade policies."

In response to Navarro's comments, a Harley spokesman said the company made its position clear in Monday's filing.

European business 

Struggling to overcome a slump in US demand, Harley has been aiming to boost sales of its iconic motorcycles overseas to 50 per cent of total annual volume from about 43 per cent currently.

In January, the company announced the closure of a plant in Kansas City, Missouri as part of a consolidation plan after its motorcycle shipments fell to their lowest level in six years.

In 2017, Harley sold nearly 40,000 new motorcycles in Europe which accounted for more than 16 per cent of the company's sales last year. The revenues from EU countries were second only to the United States. 

Harley said ramping up production at overseas international plants could take at least nine to 18 months. It has three assembly plants outside the United States — one each in Brazil, India and Thailand.

The company decided to build the Thailand plant in response to Trump's decision to pull out from the Trans-Pacific Partnership, which would have lowered import tariffs on its bikes in some of the fastest-growing motorcycle markets in Asia.

The company said it will provide more details of the financial implications of retaliatory EU tariffs and its plans to offset their impact on July 24 when its second-quarter earnings are due. 

Analysts at Baird Equity Research cut its 2018 profit estimates for Harley-Davidson to $3.7 per share from $3.9 and now expect 2019 profit of $3.85, down from $4.20.

CFRA Research lowered its 12-month price target for the stock to $47 from $49.

Harley-Davidson's shares fell as much as 7  per cent on Monday, before paring some losses in late trading. Its shares have lost about 9 per cent since early March when the trade skirmish between the United States and the EU started, and are down over 18 per cent since end-December 2017. 

Mercedes-Benz maker Daimler last week cut its 2018 profit forecast citing growing trade tensions. Its German rival BMW said it was considering "possible strategic options" in view of the rising trade tensions between China and the United States.

Trump has also threatened to crackdown on auto imports. Analysts at Moody's reckon a 25 per cent tariff on imported vehicles and parts would be negative for most of companies including Ford Motor Co. and General Motors Co.

WELLINGTON — The central banks of Australia and New Zealand ruled out on Tuesday the notion that they would issue official cryptocurrencies anytime soon, warning the potential damage to their banking systems could outweigh the benefits.

Tony Richards, head of the Reserve Bank of Australia's (RBA) payments policy, said that bitcoin and other cryptocurrencies had not proven their worth as reliable stores of value or means of payment because of their volatility and vulnerability to hacking. 

"Nine years after its launch and about five years since it entered the public consciousness, bitcoin continues to have structural flaws that make it unsuitable for many uses, many of which stem from its inefficient verification process," he said in the text of a speech given in Sydney.

Given their low usage in Australia, cryptocurrencies were unlikely to have any significant impact on the RBA's oversight of monetary policy and the banking system, he said.

The RBA had no plan for the time being to adopt any new electronic form of money for households, he added.

"Based on our interactions with our counterparts in other countries, it is also not front of mind for most other advanced economy central banks," Richards said.

The Reserve Bank of New Zealand (RBNZ) also said that while it was open to exploring new technology, it was unclear whether a central bank digital currency will bring conclusive benefits.

While digital currencies could make distribution of money safer and cheaper, they could increase the likelihood of bank runs during periods of financial instability, said RBNZ Deputy Governor Geoff Bascand.

That was because in times of financial stress, depositors could easily and remotely transfer large deposit holdings to a central bank digital currency, he said.

"A breakdown in the financial system can cause enormous economic and social harm. We could not issue a digital currency if it might undermine financial stability," Bascand said in the text of a speech at an Auckland conference.

"The payments industry is dynamic, which is good. But the Reserve Bank must be a considered prospector in the exploration for digital currency benefits — we have New Zealand's currency and financial system at stake."

Wild swings in the price of cryptocurrencies and fears they may be used for illicit activities such as tax evasion, have drawn the attention of global policymakers.

Finance leaders of the Group of 20 major economies agreed in March to open the door to regulating the booming industry, though they have only just started adopting individual rules due to the difficulty of agreeing on a multilateral approach.

Most central banks are wary of embracing cryptocurrencies and say they have no plans to issue their own digital money with the exception of Sweden, where the shift away from the use of cash is significantly more advanced than in other countries.

Bitcoin prices dropped their lowest in more than four months on Friday, continuing a downtrend driven by authorities' measures to impose tighter regulation on cryptocurrencies. 

AMMAN — The Jordan Enterprise Development Corporation (JEDCO) has started providing technical mentoring and business coaching to local companies participating in "Accelerate with JEDCO" programme, according to a JEDCO statement.

JEDCO is making that possible through contracting local consultants and mentors to provide guidance and new leadership skills in several areas such as strategic planning, marketing, and financial analysis.

Accelerate with JEDCO,  financed by the MENA Transition Fund, is an important step towards supporting, reinforcing and transforming JEDCO from a grant-centred organisation to a leading quality business support service provider for SMEs and startups, JEDCO’s CEO Omar Qaryouti said in the statement.

Qaryouti said that more than 50 local companies will benefit from this service starting from diagnostic field visits 

He noted that this is an additional service by JEDCO which focuses on helping local companies to grow in the local market and to expand their access to new markets, by providing training, networking and studies of foreign markets.

Other new services will be provided to local companies that have large export readiness to help them increase their exports and enter new markets, he added.

Accelerate with JEDCO is an integrated and comprehensive programme, specialised in expediting the growth process and development of enterprises in a manner that conforms to the Jordanian business environment.

ANKARA — Turkey's embattled lira on Monday pared gains against the US dollar after a surge following President Recep Tayyip Erdogan's decisive election victory, as analysts warned the economy still faced troubled waters.

The lira was trading at 4.66 to the dollar, gaining only 0.1 per cent in value on the day. It was trading at 5.45 to the euro, a loss of 0.1 per cent in value after 12:00 GMT.

The Turkish currency, which had lost some 20 per cent in value against the dollar this year, had only hours before surged some 3 per cent in value against the greenback on Monday morning before the losses.

Erdogan won Sunday's presidential elections in the first round and saw his ruling party-led alliance win an overall majority in parliamentary elections, according to preliminary results.

His victory means he will lead the country under a new executive presidential system with boosted powers after constitutional changes were approved in April last year.

Analysts were now watching to see what kind of monetary policy Erdogan would push as well as who he chooses as his economic advisers and ministers.

Current Deputy Prime Minister Mehmet Simsek — a former Merrill Lynch economist trusted by markets — did not run to be an MP but the president could still choose him as a member of his executive team or presidential adviser.

Jason Tuvey, senior emerging markets economist at London-based Capital Economics, said if Erdogan decided against Simsek, it "would send a worrying signal to investors".

 'Vulnerable' lira 

The Turkish economy has in recent weeks been plagued by worries about its underlying health despite high growth, with inflation well into double digits and the current account deficit widening.

The polls outcome relieved investors who had feared a prolonged period of political uncertainty after the polls but some warned it would be short-lived amid fears over whether the newly reelected president would submit to continued monetary tightening.

Tuvey of Capital Economics said that investors would keep an eye on whether Erdogan uses his boosted presidential powers to push for looser monetary and fiscal policy after he railed against interest rates during the election campaign.

"If he pursues looser fiscal policy and puts renewed pressure on the central bank to lower interest rates... that will ultimately result in slower [and more volatile] growth, higher inflation and further falls in the lira," Tuvey wrote in a note.

Inan Demir, economist at Nomura, said in a note he expected the lira to remain vulnerable unless there was a "significant reorientation of macroeconomic policies towards rebalancing".

The next central bank meeting to decide on interest rates will be on July 24.

LONDON — The British government and business leaders clashed in a deepening row over Brexit on Sunday after a senior minister accused companies of issuing "completely inappropriate" threats and undermining the prime minister. 

Aircraft manufacturer Airbus last week issued its strongest warning over the impact of Britain's departure from the European Union, saying a withdrawal without a deal would force it to reconsider its long-term position and put thousands of British jobs at risk.

Other European companies with major operations in Britain have also started to speak out two years on from the Brexit vote, voicing concerns over a lack of clarity on the terms of trade when Britain leaves next March.

"It was completely inappropriate for businesses to be making these kinds of threats for one very simple reason — we are in an absolutely critical moment in the Brexit discussions and what that means is that we need to get behind [Prime Minister] Theresa May," the Health Minister Jeremy Hunt told the BBC.

"The more that we undermine Theresa May the more likely we to end up with a fudge which will be absolute disaster for everyone," he added.

German carmaker BMW has warned the company would have to make contingency plans within months if the government did not soon clarify its post-Brexit position and German industrial group Siemens said it urgently needs clarity on how its operations would have to be organised.

The leaders of five major business lobby groups also warned the prime minister over the weekend that the ongoing uncertainty about Brexit could cost the economy billions of pounds.

Hunt, a senior figure in the government who is viewed as a potential future prime minister, dismissed "siren voices" who say Brexit negotiations are not going well and said people should ignore them.

However, Paul Drechsler, the president of leading business lobby group the CBI, said Hunt's criticisms were the "perfect strategy" for discouraging investment and would make it harder to increase tax revenue to spend on matters such as healthcare.

"The perfect strategy for inhibiting businesses from investing in the UK," Drechsler said. "This country needs ministers to be enthusiastic champions of business as found in most other countries." 

Party of business? 

The ruling Conservatives have traditionally considered themselves the party of business, advocating free markets, lower taxes and political stability.

But as Britain's politics become more polarised because of Brexit, many business leaders are feeling alienated by a party that is pushing through policies on trade and immigration that they say will damage their companies.

With only nine months until Britain is due to leave the EU on March 29, little is clear about how trade will flow as May, who is grappling with a divided party, is still trying to strike a deal with the bloc.

Business leaders are increasingly concerned that their concerns are being ignored and are stepping up their contingency plans in case Britain crashes out of the EU without a deal.

The health minister's comments were later echoed by International Trade Minister Liam Fox, who said Britain's negotiating position was being undermined by companies urging the government to rule out leaving without a deal.

"People who are making these comments need to understand that they may be actually putting the UK at a disadvantage by making these cases," he told Sky News.

The Foreign Minister Boris Johnson was quoted in the Telegraph newspaper by two sources over the weekend as dismissing business leaders' concerns about the impact of Brexit, using foul language in a meeting with EU diplomats.

A spokesperson for the foreign office disputed whether Johnson had used bad language and said he had been attacking business lobbyists.

Brexit remains the defining issue in British politics two years after Britons voted by 52-48 per cent to leave the bloc.

Around 100,000 supporters of the EU marched through central London on Saturday to demand that the government hold a final public vote on the terms of Brexit, organisers said.

VIENNA — The Organisation of the Petroleum Exporting Countries (OPEC) agreed with Russia and other oil-producing allies on Saturday to raise output from July, with Saudi Arabia pledging a “measurable” supply boost but giving no specific numbers.

OPEC had announced an OPEC-only production agreement on Friday, also without clear output targets. Benchmark Brent oil rose by $2.5 or 3.4 per cent on the day to $75.55 a barrel.

On Saturday, non-OPEC oil producers agreed to participate in the pact but a communique issued after their talks with the Vienna-based group provided no concrete numbers amid deep disagreements between OPEC arch-rivals Saudi Arabia and Iran.

US President Donald Trump was among those wondering how much more oil OPEC would deliver. “Hope OPEC will increase output substantially. Need to keep prices down!” Trump wrote on Twitter after OPEC announced its Friday decision.

The United States, China and India had urged oil producers to release more supply to prevent an oil deficit that could undermine global economic growth. 

OPEC and non-OPEC said in their statement that they would raise supply by returning to 100 per cent compliance with previously agreed output cuts, after months of overproduction. 

Saudi Energy Minister Khalid Al Falih said OPEC and non-OPEC combined would pump roughly an extra 1 million barrels per day (bpd) in coming months, equal to 1 per cent of global supply.

Top global exporter Saudi Arabia will increase output by hundreds of thousands of barrels, he said, with exact figures to be decided later. 

Russian Energy Minister Alexander Novak said his country would add 200,000bpd in the second half of this year.

Asked to what extent the decision to increase supply had been driven by pressure from Trump, Novak said: “It is obvious that we are not being driven by Tweets but base our actions on deep market analysis.”

Iran, Saudi disagreement 

Iran, OPEC’s third-largest producer, had demanded OPEC reject calls from Trump for an increase in oil supply, arguing that he had contributed to a recent rise in prices by imposing sanctions on Iran and fellow member Venezuela.

Trump slapped fresh sanctions on Tehran in May and market watchers expect Iran’s output to drop by a third by the end of 2018. That means the country has little to gain from a deal to raise output, unlike Saudi Arabia.

Iranian Oil Minister Bijan Zanganeh said the real increase could amount to as little as 500,000bpd because Saudi Arabia would not be allowed to pump more on behalf of Venezuela, where output has collapsed in recent months.

“Each country which has produced less [than its allocation] can produce more. Those which cannot, will not... This means that Saudi Arabia can increase its production by less than 100,000bpd,” Zanganeh told Argus Media.

But Falih said pro-rata quota reallocations did not have to be strict, meaning Saudi wanted to fill the gaps left by others.

“Some of the countries... are not going to be able to produce, so the others will. And that implies there will be indirectly a reallocation,” Falih said.

He also said OPEC could hold an extraordinary meeting before its next formal talks due on December 3 or adjust deliveries in September, when its monitoring committee meets, if global oil supply fell further because of sanctions on Iran.

OPEC and its allies have since last year been participating in a pact to cut output by 1.8 million bpd. The measure had helped rebalance the market in the past 18 months and lifted oil to around $75 per barrel from as low as $27 in 2016.

But unexpected outages in Venezuela, Libya and Angola have effectively brought supply cuts to around 2.8 million bpd in recent months. 

Falih has warned the world could face a supply deficit of up to 1.8 million bpd in the second half of 2018. 

“Both Saudi and Iran can show that they won,” an OPEC delegate said. 

“Zanganeh can go back to his country and say ‘I won’, because we are keeping the original agreement unchanged. Falih can go back and say ‘we will be able to raise production to meet market needs’.”

The United States, which rivals Russia and Saudi Arabia for the position of world No.1 oil producer, is not participating in the supply pact.

HONG KONG — Chinese smartphone maker Xiaomi kicked off its initial public offering on Thursday but the firm is likely to pull in about $6.1 billion, far less than originally expected, with investors having mixed views about its main business.

Xiaomi had hoped to raise $10 billion with the Hong Kong IPO, making it the biggest since Alibaba's $25 billion New York debut in 2014 and valuing the company at about $100 billion.

However, the firm is offering 2.18 billion shares at HK$17-HK$22 a piece, according to Bloomberg News, which values it at about $53.9-$69.8 billion.

Xiaomi had hoped to be the first company to list shares in Hong Kong at the same time as launching new Chinese Depository Receipts (CDRs) in Shanghai under new rules announced in April by mainland authorities to open up markets in the world's number two economy.

But on Tuesday it put off its decision on listing the CDRs until it completes its IPO in Hong Kong. The China Securities Regulatory Commission said it has cancelled a listing review originally scheduled for June 19.

This delay, as well as differing market views about Xiaomi's business model, were also among reasons for the lower valuation.

CEO Lei Jun claimed it was an Internet services company making money via online games and advertisements despite 70 per cent of its revenues coming from selling hardware, particularly smartphones.

The firm, which mainly sells cheap but high-quality smartphones in China, is looking to push into Europe — recently opening its first flagship store in Paris — as the home market reaches saturation point.

China Mobile Ltd and US wireless-chip giant Qualcomm are among the cornerstone investors and it is expected to list on July 9.

Chinese authorities devised the CDR programme, under which homegrown companies listed abroad can simultaneously list at home, after watching technology heavyweights Alibaba and Baidu list on Wall Street.

The objectives of the plan include helping to develop China's still relatively immature and volatile share markets while allowing domestic investors to invest in the country's big tech champions.

Alibaba and Hong Kong-listed Tencent have expressed an interest in the plan.

Xiaomi shipped 28 million smartphones worldwide from January to March, an 88- per cent surge year-on-year.

That was fourth in the world after Samsung, Apple and China's Huawei, according to figures from the International Data Corporation.

VIENNA — The Organisation of the Petroleum Exporting Countries (OPEC) cartel meets on Friday to decide output policy amid calls from major consumers such as the United States and China to cool down oil prices and support the global economy by producing more crude.

Iran signalled on Wednesday it could compromise on a small increase in the Organisation of the Petroleum Exporting Countries (OPEC) oil output when the group meets this week.

In tandem, Saudi Arabia scrambled to convince fellow members of the need for a larger rise in production.

On Tuesday, Iran said OPEC was unlikely to reach a deal, setting the stage for a clash with kingpin Saudi Arabia and non-member Russia, which are pushing to raise production steeply from July to meet growing global demand.

But on Wednesday, Iranian Oil Minister Bijan Zanganeh said OPEC members that had overdelivered on cuts in recent months should comply with agreed quotas.

That would effectively mean a modest boost from producers such as Saudi Arabia that have been cutting more deeply than planned despite production outages in Venezuela and Libya. 

"OPEC could keep the same deal with compliance going back to 100 per cent," said an OPEC source who is aware of Iran's stance.

OPEC Secretar General Mohammad Barkindo said he was confident there would be a deal when the producer group meets in Vienna on Friday.

Russia has proposed OPEC and non-OPEC producers raise output by 1.5 million barrels per day (bpd), effectively wiping out existing production cuts of 1.8 million bpd that have helped rebalance the market in the past 18 months and lifted oil to $75 per barrel. Oil traded as low as $27 in 2016.

Saudi Energy Minister Khalid Al Falih also said on Wednesday that the market demanded more oil in the second half of this year and that OPEC was moving towards "a good decision". 

Ecuador said OPEC and its allies could agree to a compromise increase in output of around 0.5-0.6 million bpd.

A decision to increase output could be taken even with Iran refusing to sign up, as has happened before in OPEC.

Addressing over-compliance 

Iran has so far been the main barrier to a deal, with Zanganeh saying OPEC should not yield to pressure from US President Donald Trump to raise output.

He said Trump had contributed to the rise in prices by imposing sanctions on OPEC members Iran and Venezuela, which will likely lead to lower exports.

Zanganeh said he would leave Vienna on Friday even before OPEC holds talks with non-OPEC producers the next day, but efforts were underway on Wednesday to convince Iran to participate in a deal.

Sources said Saudi Arabia did not want to be seen as putting too much pressure on Iran and hence Russia was instead trying to convince Tehran.

Zanganeh was due to attend a ministerial committee on Thursday, two sources said. Iran is usually not part of the committee, which includes Russia, Saudi Arabia, the United Arab Emirates, Oman, Kuwait, Algeria and Venezuela.

Iraq and Venezuela have also opposed a relaxation of production cuts, fearing a slump in prices.

Iraqi Oil Minister Jabar Al Luaibi said on Wednesday he hoped there would be agreement when OPEC meets but added: "The oil market has not reached the level of stabilisation".

Gulf producers usually aligned with Saudi Arabia — the UAE, Kuwait, Oman and Bahrain — have also cautioned against a large output increase and signalled they have been rattled by Riyadh's close coordination with Russia, sources have said.

Gulf oil producers' views still differed on Wednesday on how much to increase production and whether such a move should be gradual, sources said.

Nevertheless, they tried to bring Iran on board for a deal, with ministers from the UAE, Kuwait and Oman meeting Zanganeh on Wednesday.

Oman's oil minister, Mohammed Bin Hamad Al Rumhy, said he believed Iran would agree to an output increase on Friday. He said the meeting would tackle over-compliance with oil output cuts and that Iran was "very cooperative".

NEW YORK — The dollar, yen and Swiss franc rose on Tuesday as traders piled into perceived less risky currencies after US President Donald Trump threatened to slap more tariffs on China, fanning a trade dispute between the world's two biggest economies.

Trump said he would impose a 10 per cent tariff on $200 billion of Chinese goods, following levies on $50 billion worth of Chinese imports enacted last week.

China's commerce ministry warned on Tuesday that Beijing would fight back firmly with "qualitative" and "quantitative" measures if the United States implements more tariffs. 

Fears of a trade war that could harm global growth spurred sales of the Chinese yuan, which fell to a five-month trough in the offshore market, as well as commodity-linked and emerging market currencies.

Worries about a growing US-China trade spat also sparked a selloff in stock markets around the world.

"A pending trade war and a sell-off in global equities is benefiting the yen and dollar," said John Doyle, vice president of dealing and trading at Tempus Inc. in Washington. "Emerging market currencies, especially the South African rand, are taking the bulk of the heat."

The index that tracks the greenback against the euro, yen, sterling and three other currencies reached 95.296, the highest since last July. It was last up 0.35 per cent at 95.133.

The yen climbed 0.5 per cent at 109.95 yen per dollar, while it advanced 1 per cent versus the euro to 127.09 yen, its strongest in over two weeks.

The Swiss franc increased 0.6 per cent against the euro at 1.1495 franc and was marginally higher versus the greenback at 0.9948 franc.

Among the day's losers, the yuan weakened to 6.491 to the dollar in the offshore market, the lowest in five months.

"Of course a far-reaching trade war would be detrimental for everyone in the end, but mainly the countries whose growth heavily depends on foreign trade," said Commerzbank Currency Strategist Thu Lan Nguyen in Frankfurt. 

The Australian dollar sagged to a one-year low of $0.73475 as the trade tension hurt base metal prices.

The Canadian dollar fell to a one-year low of C$1.3291 on worries about Canada's own trade feud with the United States.

In emerging markets, the South African rand tumbled to its weakest level in nearly seven months at 13.7895 rand per dollar.

In addition to trade concerns, the euro slumped to a two-week low of $1.1528 after European Central Bank President Mario Draghi called for a patient approach to European monetary policy at a forum in Portugal. 

The single currency was also under pressure as German Chancellor Angela Merkel's Bavarian allies may defy her by implementing a plan to limit immigration at the German border.

FRANKFURT AM MAIN — Audi Chief Executive Rupert Stadler was arrested on Monday in connection with parent company Volkswagen’s (VW) “dieselgate” emissions cheating scandal, with prosecutors saying they feared he might try to suppress evidence.

The dramatic development comes a week after Munich prosecutors raided Stadler’s home after charging him with fraud and falsifying documents that allowed diesel vehicles equipped with cheating software to be sold to European customers.

Four police officers detained the Audi boss at his home at between 6 and 7am, a spokesman for Munich prosecutors told AFP, saying that the arrest was justified as he is suspected of “seeking to influence witnesses or other suspects”.

Stadler has denied the accusations and has said he is ready to be interrogated from Wednesday, added the spokesman.

Hours after the arrest, the VW group’s management named Dutchman Bram Schot, who joined VW in 2011, to take over from Stadler as interim CEO.

Stadler is the most senior executive yet to be detained in the dieselgate crisis, which started when the VW group admitted in 2015 to installing so-called “defeat devices” in some 11 million diesels worldwide that made them seem less polluting in lab tests than they actually were on the road.

The affected vehicles involved VW’s own-brand cars, but also those made by Audi, Porsche, Skoda and Seat.

VW’s luxury subsidiary Audi has long faced suspicions that its engineers helped create the software used in the scam.

Audi’s former head of engine development, Wolfgang Hatz, was taken into custody in Germany in September 2017 and remains behind bars.

A manager at Porsche was also detained in April. He was identified by German media as Joerg Kerner, an engineer in charge of Porsche’s engine division who was working at Audi when the diesel scandal broke.

Earlier this month, German authorities ordered the recall of some 60,000 Audi A6 and A7 cars across Europe to remove illegal emissions control software — using a different technique however than the one at the heart of dieselgate.

“Audi needs a new start,” said auto industry expert Ferdinand Dudenhoeffer of the CAR research centre.

Stadler, 55, who joined Audi in 1990 and has been its CEO since 2007, has enjoyed the full backing of VW’s top brass so far.

But Dudenhoeffer said that may change, given the “very serious” allegations against him.

Stadler’s arrest is the latest blow to the VW group, which has struggled to shake off the dieselgate crisis and continues to face a litany of investigations at home and abroad.

Two former VW chief executives — Martin Winterkorn and his successor Matthias Mueller — have both landed in the sights of German prosecutors.

They are suspected of knowing earlier than they have admitted about the cheating, meaning they may have failed in their duty to inform investors in the car giant about the financial risks.

US prosecutors also indicted Winterkorn last month, saying he knew of the company’s emissions cheating as early as May 2014 but decided to continue.

Current boss Herbert Diess has also been accused of knowing about the scam before it became public — an allegation rejected by the firm last month.

The diesel scandal has so far cost the VW group more than 25 billion euros ($29 billion) in buybacks, fines and compensation, mainly in the United States where the cheating scam was first uncovered.

But pressure has been mounting on the auto giant to make amends in Europe, too.

Just last week, VW agreed to pay a 1-billion-euro fine to settle a probe by German prosecutors.

In doing so, VW said it admitted its “responsibility for the diesel crisis”.

Despite the controversy, the VW group last year reported global sales of 10.7 million vehicles — a new record.

But the saga has cast a wider pall over Germany’s vaunted car industry, with suspicions of emissions manipulation spreading to rivals BMW and Mercedes-owned Daimler.

To date, just two people have been convicted over “dieselgate”, both in the US.

Former VW executive Oliver Schmidt is serving a seven-year sentence after pleading guilty to conspiracy to commit fraud and violating the US Clean Air Act.

VW Engineer James Liang, who cooperated with investigators, was handed 40 months in jail last year.