(Recasts with VW statements, analyst, fund manager comments)
* Porsche boss Matthias Mueller named CEO
* Minister says VW cheated tests on 2.8 mln cars in Germany
* VW suspends some staff, hires law firm to investigate
By Andreas Cremer
WOLFSBURG, Germany, Sept 25 (Reuters) - Volkswagen named company veteran Matthias Mueller as its chiefexecutive on Friday as the German carmaker struggles to get togrips with a crisis over rigged diesel emission tests that itschairman called "a moral and political disaster".
After a marathon board meeting at its headquarters inWolfsburg, the world's biggest automaker said Mueller, the62-year-old head of its Porsche sports car division, wouldreplace Martin Winterkorn, who resigned as CEO on Wednesday.
As Mueller took the helm, however, Germany's transportminister announced the carmaker had manipulated test results forabout 2.8 million vehicles in the country, nearly six times asmany as it has admitted to falsifying in the United States,pointing to cheating on a bigger scale than previously thought.
Volkswagen, for generations a model of German engineeringprowess, is under huge pressure to take decisive action over thebiggest business-related scandal in its 78-year history.
"Under my leadership, Volkswagen will do all it can todevelop and implement the strictest compliance and governancestandards in the whole industry," Mueller said in a statement.
The company said it would appoint a U.S. law firm to conducta full investigation, suspend an unspecified number of staff andadopt a more decentralised structure with a slimmed downmanagement board.
But the scandal keeps growing. German transport ministerAlexander Dobrindt said on Thursday Volkswagen had also cheatedtests in Europe, where its sales are much higher than in theUnited States. On Friday Dobrindt put the number of affectedvehicles in Germany at 2.8 million.
Regulators and prosecutors across the world areinvestigating the scandal, while customers and investors arelaunching lawsuits.
The wider car market has been rocked too, with manufacturersfearing a drop in sales of diesel cars and tougher testing.
Regulators in Europe and the United States said on Fridaythey would take a harder line on enforcing compliance withpollution standards and would be less tolerant of gaps betweenreal world emissions and laboratory results.
Volkswagen said on Tuesday 11 million vehicles worldwidewere fitted with the software that allowed it to cheat U.S.tests, while adding it was not turned on in the bulk of them.
Customers and motor dealers are furious that Volkswagen hasyet to say which models and construction years are affected, andwhether it will have to recall any cars for refits.
THE RIGHT MAN?
The task facing Mueller is enormous, with the latest issueof influential German weekly Der Spiegel showing pall-bearerscarrying a Volkswagen car decked out as a coffin under theheadline "The Suicide".
"His appointment is a step towards cleaning-up," said LBBWanalyst Frank Biller about Mueller, a former head of productstrategy close to the Piech-Porsche family that controlsVolkswagen.
But Henning Gebhardt, global head of equity at DeutscheAsset & Wealth Management, said Volkswagen had missed anopportunity.
"He won't be able to lead the company for 10 years due tohis age alone. That means there will be discussions aboutsuccession in the foreseeable future again," he said.
Bernstein analyst Max Warburton also questioned whether aman who has spent more than three decades at the company was theright man to signal a break with the past.
He urged "big and bold action", saying the new CEO shouldoffer to buy back and scrap almost 500,000 diesel cars sold inthe United States, which would cost about $6 billion.
Volkswagen said sales chief Christian Klingler would leavethe company, but that U.S. head Michael Horn -- also widelytipped to go -- would stay.
Acting Chairman Berthold Huber apologised to "our customers,the public, authorities and investors" and asked them to giveVolkswagen a chance to make good on the damage from theemissions scandal.
"I want to be very clear, the manipulation of tests fordiesel engines is a moral and political disaster," Huber said.
Volkswagen will hold an extraordinary shareholder meeting onNov. 9 in Berlin to approve its proposed changes.
Frank Schellenberg, a taxi driver in Wolfsburg where thecarmaker employs around 70,000 people, said locals felt betrayedand feared the worst.
"They have lost any contact with the real world, thecustomers who have been buying their cars in good faith," hesaid, pointing to the firm's 13-storey administrative building."Everyone in Wolfsburg is expecting tough times and job cuts." (Additional reporting by Reuters bureaus in Europe, Asia andAmericas; Writing by Mark Potter; Editing by Timothy Heritageand Gareth Jones)