Volkswagen chief executive Martin Winterkorn has resigned over a pollution cheating scandal that has sparked a US criminal investigation and worldwide legal action with unfathomable financial consequences for the auto giant.

“I am shocked by the events of the past few days. Above all, I am stunned that misconduct on such a scale was possible in the Volkswagen Group,” Winterkorn said on Wednesday in a statement issued by the carmaker.

“Volkswagen needs a fresh start, also in terms of personnel. I am clearing the way for this fresh start with my resignation.”

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The stock market barely flinched at the news.

Following a two-day free fall that had axed 35 per cent – or 25 billion euros ($A39.26 billion) – off the company’s market value on Monday and Tuesday, the shares had bounced back on Wednesday and closed up 5.19 per cent after Winterkorn’s announcement.

Even if the haemorrhage on the markets may have abated, Volkswagen, the world’s largest auto manufacturer by sales in the first half of this year, still faces a growing tangle of legal threats after it admitted that as many as 11 million of its diesel cars worldwide are equipped with software capable of fooling official pollution tests.

In addition to investigations from France to South Korea, public prosecutors in Germany also said they were examining information and evaluating legal suits already filed against the company by a number of private individuals to decide whether to launch a full criminal inquiry against those responsible at VW.

VW boss Martin Winterkon said he was “infinitely sorry”. Photo: Getty

A day after Winterkorn had offered his “deepest apologies”, the 68-year-old said he accepted his “responsibility for the irregularities that have been found in diesel engines”.

But he also insisted: “I am not aware of any wrongdoing on my part.”

His widely predicted departure came after a meeting of the supervisory board’s six-member steering committee in Wolfsburg.

A new chief executive is to be named on Friday, and other personnel changes were expected, the board said.

According to the US authorities, VW has admitted that it equipped about 482,000 cars in the US with sophisticated software that covertly turns off pollution controls when the car is being driven.

It turns them on only when it detects that the vehicle is undergoing an emissions test.

With the so-called “defeat device” deactivated, the car can spew pollutant gases into the air, including nitrogen oxide in amounts as much as 40 times higher than emissions standards, said the US Environmental Protection Agency (EPA).

The EPA, which announced the allegations Friday along with California state authorities, is conducting an investigation that could lead to fines amounting to a maximum of more than $US18 billion ($A25.40 billion).

The US Department of Justice has also launched a criminal inquiry led by its environment and natural resources division, a source told AFP, speaking on condition of anonymity.

The California Air Resources Board, too, is investigating Volkswagen’s pollution violations.

New York Attorney General Eric Schneiderman said he had launched his own probe of Volkswagen and would work on it with prosecutors from other states across the United States.

Carmaker enlists BP law firm

The embattled German carmaker has enlisted the law firm that defended oil giant BP following the calamitous 2010 Deepwater Horizon oil spill.

A Volkswagen spokesperson on Wednesday said Kirkland & Ellis are “a retained firm”.

The firm represented BP after the 2010 Gulf of Mexico disaster, which killed 11 men and caused millions of barrels of oil to flow into Gulf waters in one of the worst environmental calamities in US history.

In July, BP announced an $US18.7 billion ($A26.72 billion) settlement to compensate the US and five states for damages from the spill.

Volkswagen faces a tangle of lawsuits and regulatory investigations following its admission that it intentionally sought to circumvent US pollution rules.