Following the departure of chief executive Martin Winterkorn and sales chief Christian Klingler in VW's deepest-ever crisis, more heads looked set to roll after new CEO Matthias Mueller vowed to be "ruthless" in investigating the affair.
The steering committee of the carmaker's supervisory board met on Wednesday to discuss the preliminary findings of an internal probe into a scam that has rocked the automobile sector and wiped €29 billion off VW's market capitalisation.
A dozen managers suspected of helping to develop and install the sophisticated software, known as a defeat device, or who were aware of the fraud have been suspended, the monthly Manager Magazin reported.
Supervisory board member Olaf Lies said "those people who allowed this to happen, or who made the decision to install this software - they acted criminally. They must take personal responsibility".
Regulatory and legal probes are underway in several countries to find out who knew what and when, and German prosecutors have also launched an investigation against 68-year-old Winterkorn.
VW's finance chief Hans-Dieter Poetsch, who has been tipped to take over as supervisory board chief, could also find himself in the firing line, given his close relationship with Winterkorn and his key role on the executive board.
"Poetsch's possible nomination as new supervisory board chief is looking increasingly questionable," the business daily Handelsblatt quoted a fund manager, Hans-Christian Hirt, as saying.
The suspect diesel engines went on sale in 2009, which suggested the pollution-cheating software must have been under discussion within the company as early as 2007 and 2008, the daily Sueddeutsche Zeitung wrote.
Millions of cars affected
Winterkorn took the driving seat at VW in 2007. His predecessor Bernd Pischetsrieder and the former head of the Volkswagen brand issued statements via their lawyers late on Tuesday denying they knew anything about the manipulation.
Meanwhile, VW's luxury sports car maker Porsche named 47-year-old Oliver Blume as its new CEO Wednesday, taking over from Mueller who had been in the driving seat for five years until he was appointed head of the group last Friday.
Volkswagen, the world's biggest carmaker by sales, has admitted that up to 11 million diesel cars worldwide are fitted with devices that can switch on pollution controls when they detect the car is undergoing testing.
They then switch off the controls when the car is on the road, allowing it to spew out harmful levels of emissions.
Since the revelations on September 18, the VW share has seen nearly 40 percent of its value go up in smoke. Shares showed some signs of stabilisation on Wednesday, closing up 2.68 percent at 97.75 euros on the Frankfurt stock
The German government has given VW until October 7 to explain how it will resolve the scandal.
Finance Minister Wolfgang Schaeuble blamed the scam on the same greed that had led to the financial crisis.
"If you want to succeed on global markets, competition is brutal. Everyone wants to be the biggest," he told reporters. "It's the lust for fame, for recognition."
Germany's Federal Transport Authority KBA threatened to withdraw domestic road approval for VW models if the carmaker did not come up with the recall plan by next week.
VW has said owners of the affected cars would be notified "in the next weeks and months," adding that "all the brands concerned are going to create Internet pages where clients will be able to follow developments".
Tidal wave of lawsuits
VW said Thursday it plans to recall up to 120,000 diesel cars sold in South Korea, the day after its British arm said it would recall and fix nearly 1.2 million vehicles.
Lawsuits, including class-action litigation, are also being filed in the United States and South Korean VW vehicle owners are also suing the company.
VW has already said it will set aside 6.5 billion euros in provisions in the third quarter, but analysts suggest one to three billion euros more could be needed.
On top of that, VW also faces onerous regulatory fines, including up to $18 billion in the United States - and the fallout on customer purchases cannot yet be estimated.
Australia's competition watchdog on Thursday said the German auto maker could be fined Aus$1.1 million (US$780,000) for each cheating device, potentially amounting to billions of costs although a fine of such size would be unlikely.
The consumer protection group Deutsche Umwelthilfe said the entire European car industry was involved.
"It's not just a 'Volkswagen-gate,' it's not just an affair affecting the whole of German industry. We have here fraud organised at a European level," claimed the organisation's chief, Jürgen Resch.