"It was in fact, a very unfortunate choice of words and I am deeply sorry for any unintentional pain I may have caused", Diess wrote in a post on his LinkedIn page.
"It was in no way my intention to put this statement in a false context", he said.
Volkswagen was originally founded in 1937 by the National Socialist Party under Adolf Hitler to develop an affordable economy auto that would eventually become the Volkswagen Beetle. Volkswagen is betting its future on electric cars He said his comments were meant to highlight Volkswagen's strong profits, not cause offense. During the Second World War, prisoners of war and concentration camp captives were used as slave labour at Volkswagen's Wolfsburg factory as part of Germany's military efforts.
"The statement of the CEO Herbert Diess is in this context considered inappropriate and hard to comprehend", VW's supervisory board said Friday, adding that it "strongly distances itself from this, but at the same time takes note of the immediate apology from Mr. Diess".
Diess added that he, the company and its staff were "aware of the particular historical responsibility of Volkswagen in connection with the Third Reich". German government spokesman Steffen Seibert declined to comment.
Analysts at Bernstein said management change at Volkswagen had become a significant risk following the supervisory board's statement.
Diess took to social media this week to apologize for the gaffe.
VW said the SEC complaint is "legally and factually flawed" and the company will "contest it vigorously".