Former VW Engine Chief Arrested, Signaling Widening Emissions Case

But two people with firsthand knowledge of the arrest, who requested anonymity because they did not want to be seen as violating German protocols, confirmed that the person detained was Mr. Hatz.

In September 2015, Volkswagen was accused of evading emissions standards in the U.S. The scandal has hit the company hard.

German news media outlets, including the Süddeutsche Zeitung newspaper and the broadcasters NDR and WDR, reported earlier that Mr. Hatz was the person arrested.

Mr. Hatz was chief of motor development at Audi from 2001-7 before moving to the same position at Volkswagen, where he reported directly to the management board. In 2011, he moved to Porsche while retaining influence at the parent company. He was among the select group of executives who presented new models at the extravaganzas that Volkswagen staged before major motor shows in Frankfurt and elsewhere.

Volkswagen declined to comment.

Including two people in custody in the United States, Mr. Hatz is the fourth former or current Volkswagen employee to be behind bars. More arrests are likely, however.

Prosecutors in Braunschweig, Germany, near Volkswagen’s headquarters in Wolfsburg, are investigating nearly 50 people in connection with the case, according to Klaus Ziehe, a spokesman for the state attorney’s office. They include three past or current members of top management: Hans Dieter Pötsch, the chairman of the Volkswagen supervisory board; Herbert Diess, the head of the unit that makes Volkswagen brand cars; and Martin Winterkorn, a former chief executive.

The three men are suspected of market manipulation for failing to inform shareholders soon enough that Volkswagen faced enormous fines for emissions cheating in the United States. All three have denied wrongdoing.

Mr. Ziehe said Thursday that investigators were close to allowing defense lawyers to examine the evidence gathered against their clients. That would be a sign that the investigation is largely complete, though formal charges would probably not be filed until next year.

Until Mr. Hatz’s arrest, the only person detained in Germany was Zaccheo Giovanni Pamio, former chief of thermodynamics in Audi’s engine development department. Mr. Pamio, a citizen of Italy, has been jailed since July and has implicated top managers of the division, according to his defense lawyer, Walter Lechner.

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Volkswagen admitted that 11 million of its vehicles were equipped with software that was used to cheat on emissions tests. This is how the technology works and what it now means for vehicle owners.

OPEN Graphic

Mr. Pamio is trying to win release on bail. In Germany, suspects can be held if a judge finds that there is a strong case against them and there is a risk that they might flee or obstruct the investigation.

Both Mr. Hatz and Mr. Pamio were arrested at the behest of Munich prosecutors, who have a reputation for aggressiveness. The Munich state attorney’s office is taking the lead in investigating reported wrongdoing at Audi, while Braunschweig prosecutors are investigating the parent company.

Volkswagen has pleaded guilty to charges in the United States, admitting that it programmed 600,000 Volkswagen and Audi diesel vehicles to deliver permissible emissions only when the car’s engine software detected that a test was underway. At other times they emitted more harmful nitrogen oxides than a modern long-haul truck.

But Volkswagen has continued to insist that members of its management board, including Mr. Müller, had no knowledge of the illegal software until shortly before the scandal came to light in September 2015.

Prosecutors have searched Mr. Müller’s office in conjunction with the investigation, as well as the office of Rupert Stadler, the head of Audi. Neither has been identified as a suspect in the emissions case.

Mr. Hatz was chief of research and development at Porsche while Mr. Müller was chief executive of Porsche. Mr. Hatz also worked closely with Mr. Winterkorn, who resigned in 2015 days after the scandal came to light. Mr. Müller was named Mr. Winterkorn’s successor.

Mr. Hatz was suspended from his position at Porsche soon after Mr. Winterkorn resigned, and he formally left the company in May 2016. Little had been heard about him since then, and he was not among six people indicted by U.S. prosecutors in January.

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