Porsche's head of powertrain development arrested, source says

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HAMBURG (Reuters) - German police arrested the head of powertrain development at Volkswagen’s Porsche business and are holding him on remand because he is considered a flight risk, a person familiar with the matter said on Friday.

The arrest of Joerg Kerner was related to ongoing inquiries into emissions manipulation at Volkswagen VOWG_p.DE, more than two years after the German carmaker admitted cheating on U.S. exhaust tests, the person said.

A spokesman for Porsche declined to comment.

Kerner was one of three current or former employees of Porsche that prosecutors were targeting when they searched offices at Porsche and its sister brand Audi NSUG.DE earlier this week, a spokesman for the Stuttgart public prosecutor's office said.

Those three, as well as Porsche itself, were suspected of having known that engines developed by Audi had been manipulated, Porsche Chief Executive Oliver Blume told staff in a memo, excerpts of which were seen by Reuters on Friday.

“We reject these allegations and will do our utmost to clear up the matter,” Blume said in the memo, which was first reported by the newspaper Bild am Sonntag earlier on Friday.

The arrest occurred on Thursday, he said.

Earlier this year, prosecutors widened an investigation of Audi, which developed a 3.0 litre V6 diesel engine that was used in about 80,000 VW, Audi and Porsche models found to have been equipped with illicit software.

Reporting by Jan Schwartz; Writing by Maria Sheahan; Editing by Sabine Wolrab, Larry King