VW cuts investment due to cost of fixing scandal | Fin24
 
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VW cuts investment due to cost of fixing scandal

Nov 20 2015 15:30
Christoph Rauwald

Frankfurt - Volkswagen cut its annual investment budget 30% amid unresolved talks with European and US regulators about how to fix about 11 million cars with rigged emissions systems.

The carmaker said Friday it will spend €12bn on vehicles, factories and technology development next year. Last year it had pledged an average of €17.1bn for five years.

The company’s supervisory board, managers and labor leaders are wrangling over how best to prune an automotive group that spans 12 brands and more than 300 models.

Prior to the Friday announcement, Volkswagen had more than doubled its annual investment spending since 2008. It has space to cut capital expenditures and development costs by 10%, according to estimates from Evercore ISI.

“What we definitely won’t do is make cuts at the expense of our future,” CEO Matthias Mueller said in a press conference at the company’s Wolfsburg, Germany headquarters.

The carmaker is facing a Friday deadline to present US and California regulators with a plan to fix diesel vehicles that had software to turn on full emissions-control systems only during pollution tests. The 482 000 affected cars in the US were emitting as much as 40 times the permitted levels of smog- forming nitrogen oxides.

Volkswagen has said it will recall as many as 8.5 million diesel cars in Europe due to the same issue. In the third quarter, it set aside €6.7bn to pay for the diesel recalls, noting that the full cost will probably be higher.

Separately, about 800 000 vehicles also had irregular readings for carbon dioxide. Volkswagen won’t have to recall those vehicles but will have to compensate for higher tax payments and worse-than-promised fuel consumption. The company has estimated the economic risk of the irregularities at another €2bn.

volkswagen  |  industrial  |  emissions scandal
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