- CEO says VW won't cut spending "at the expense of our future"
- Carmaker to reduce investment in factories and equipment
Volkswagen AG’s supervisory board plans to meet again in just over two weeks after announcing initial spending cuts on Friday, as it grapples with the fallout of the two-month-old emissions crisis.
On the agenda for the Dec. 9 meeting would be feedback from regulators on the technical solutions proposed to fix cars manipulated to cheat on emissions tests, according to people familiar with the plans. The company is working on a more comprehensive spending overhaul as part of a new strategy Chief Executive Officer Matthias Mueller intends to unveil next year, said one of the people, who asked not to be named because the talks are private.
Volkswagen said Friday it will trim spending on factories and equipment to 12 billion euros ($12.8 billion) next year, down from 12.9 billion euros under the previous budget and in line with cuts it had already announced. It halted work on a design center in Germany and a paint shop in Mexico, postponing deeper reductions in the biggest investment budget in the auto industry.
“This is clearly just the beginning as you can’t halt everything at once,” said Frank Schwope, a Hanover-based analyst at NordLB. “It’s urgently needed. The company needs to save, save, save.”
Friday’s investment plan was only for 2016, rather than the five years Volkswagen has provided in the past. That gives Mueller time to negotiate with labor leaders on more painful measures to prune a group that spans 12 brands and more than 300 models. In pursuit of growth, Volkswagen had more than doubled its annual investment spending from 2008 to this year.
A spokesman said the board might meet again next month but declined to comment on the exact date or topic of the next meeting.
The company didn’t announce plans for development spending, which totaled about 4.4 billion euros a year under its previous budget. Investment for the group’s two Chinese joint ventures, which are self-funded, would be steady at 4.4 billion euros annually. This round of cuts targets marginal projects, including the next generation of the slow-selling Phaeton sedan, now delayed after previously being cut to only an electric version.
“What we definitely won’t do is make cuts at the expense of our future,” Mueller said in a press conference at the company’s Wolfsburg, Germany headquarters. What’s not immediately necessary will be canceled or postponed, the CEO said.
The roughly 1 billion-euro reduction in investment matches plans announced last month by Volkswagen’s namesake brand. The lack of steeper cuts suggests how complex it will be to find a clear way out of the crisis stemming from circumventing emissions regulations. The company estimates the scandal will cost it at least 8.7 billion euros.
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Volkswagen has said it will recall as many as 8.5 million diesel cars in Europe. In the third quarter, it set aside 6.7 billion euros to pay for repairs, noting that the full cost will probably be higher. In addition, 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 2 billion euros.
The carmaker is facing a Friday deadline to present U.S. 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 U.S. were emitting as much as 40 times the permitted levels of smog-forming nitrogen oxides.
(An earlier version of this story corrected the comparison figure for spending cuts.)