WOLFSBURG: Volkswagen cut ¤1bn ($1.1bn) from its 2016 investment plan yesterday, as the German carmaker braces for a multi-billion-euro hit from its emissions cheating scandal.
The supervisory board of Europe’s biggest auto manufacturer said it would cap spending on property, plant and equipment at around ¤12bn ($12.8bn) next year, down about 8 percent on its previous plan of around ¤13bn.
Volkswagen (VW) is battling the biggest business crisis in its 78-year history after admitting in September that it cheated US diesel emissions tests. It said earlier this month it had also overstated fuel efficiency in some vehicles.
Analysts have said the scandals could cost the company ¤40bn or more in fines, lawsuits and vehicle refits. “We are operating in uncertain and volatile times and are responding to this,” Chief Executive Matthias Mueller said.
“We will strictly prioritise all planned investments ... anything that is not absolutely necessary will be cancelled or postponed.”
The cut in capital spending is VW’s first since the height of the financial crisis in 2009.
In previous years, the company has published investment plans for several years ahead. But yesterday, it only gave numbers for next year, and did not give a figure for research and development, which last year accounted for about a quarter of overall planned spending of ¤85.6bn for 2015-19.
Bernd Osterloh, VW’s powerful works council chief, said in a statement that the supervisory board would take another look at investment and capacity plans at its first meeting next year.
“We will continue to keep a particularly vigilant eye on the job situation,” he added. “We see risks here at individual sites, especially in the area of temporary employment.” Some analysts have long urged VW to reduce spending and become more efficient, with profit margins at its mass-market namesake brand lagging those at rivals.
They have suggested the emissions scandal could provide an opportunity for management to force through changes that otherwise might have been resisted by the company’s influential trade unions, and ultimately boost VW shares.
Amid fears the emissions scandal could hit sales of diesel vehicles, Mueller said VW would increase spending on alternative technologies such as electric and hybrid vehicles by ¤100m next year compared with previous targets.
He said construction of a planned new design centre in VW’s home town of Wolfsburg was being put on hold, saving about ¤100m, while the construction of a paint shop in Mexico was under review.
In the model range, the successor to the high-end Phaeton saloon, an electric model, is being delayed.
VW is due to submit plans to US regulators for dealing with vehicles affected by its emissions cheating. Pressure has been building on the company to buy back some older diesel vehicles.
Earlier, the European Commission gave VW until the end of the year to provide information on its overstatement of fuel efficiency in some vehicles.
VW also said Mueller would temporarily take on responsibility for personnel matters until a replacement was found for Horst Neumann, who retires at the end of November. It named two new employee representatives to the supervisory board as well, to replace departing ones.
Reuters
