UPDATE: VW Diesel Probe Centers on Three Top Engineers

Volkswagen AG's internal investigation into its cheater diesel engines is zeroing in on former Audi chief engineer Ulrich Hackenberg; Porsche engine guru Wolfgang Hatz; and Heinz-Jakob Neusser, former head of product development for the Volkswagen brand, sources tell Bloomberg News.

But Reuters cites its own sources who say VW has turned up no evidence of wrongdoing by the three executives, all of whom have been suspended. The news service says Hackenberg has hired attorneys to challenge his suspension, and Hatz expects VW's inquiry to clear him.

Reuters' sources add that VW has suspended more than seven other senior managers to date, none of whom has been identified publicly.

Hackenberg and Hatz, two highly regarded engineers, were put in charge of research and development at Volkswagen Group in 2007, soon after Martin Winterkorn became the company's CEO. Winterkorn resigned two weeks ago over the diesel scandal, which involves 11 million diesels secretly programmed to cheat government emission tests.

The company began developing the so-called E 189 family of 4-cylinder diesels a decade ago. Winterkorn envisioned diesels as a way to help meet his goal of tripling VW Group sales in the U.S., where only about 5% of passenger vehicles are diesel-powered.

Bloomberg's sources say VW balked at the advice of Wolfgang Bernard, a former Daimler AG executive who was running the VW brand at the time, to use Daimler's effective but costly BlueTec diesel technology to satisfy America's difficult nitrogen oxide emission standard. Instead, the company struggled to find a cheaper solution.

By the time the engines went into production in 2008, VW had decided to cheat instead, sources tell Bloomberg. VW has since admitted the engines were equipped with software that tightened emissions to pass certification tests, then loosened them to improve performance on the road.