VW Sticks to SUV Project in U.S. as Cutbacks Loom After Scandal

  • New vehicle for North American market to be built in Tennessee
  • VW says American market remains important for strategy

Volkswagen AG will maintain a $900 million investment plan to build a new sport-utility vehicle for North America at its only U.S. manufacturing site even as cost cuts loom in the wake of the company’s diesel-emission manipulation scandal.

“The American market is and will remain a strategically important market for Volkswagen,” spokesman Eric Felber said by phone.

Europe’s largest automaker approved a project last year to spend $900 million, including $600 million at its factory in Chattanooga, Tennessee, to build a seven-seat SUV starting next year as part of a broader push to become more than a niche player in U.S. The Wolfsburg, Germany-based company expanded in China and gained market share in Europe over the last years, but its latest effort to win over American buyers with a version of the mid-sized Passat sedan ran out of steam.

VW’s admission last month that it rigged emission tests for some of its diesel models and has to recall as many as 11 million cars worldwide including 480,000 in the U.S. has thrown its plans for North America into question.

The carmaker earlier this month said it will lower spending at its namesake passenger-car brand by 1 billion euros ($1.1 billion) per year to help weather the financial fallout from fixing the cars as well as related lawsuits and regulatory probes. VW set aside 6.5 billion euros in provisions in the third quarter, but acknowledged that this won’t be enough.

VW is scheduled to report third-quarter earnings on Wednesday and will probably post a 3.27 billion-euro operating loss, compared with a 3.23 billion euro profit a year ago, according to 11 analyst estimates compiled by Bloomberg. 

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