Wolfsburg, Germany: Volkswagen cut 1 billion euros ($ 1.1 billion) from its investment plan for next year on Friday, 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 12 billion euros ($ 12.8 billion) in 2016, down about 8 per cent on its previous plan of around 13 billion euros.
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 consumption in some vehicles.
Analysts have said the scandal could cost the company 40 billion euros 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 in a statement.
“We will strictly prioritize 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.
Some analysts have long urged the company 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 powerful trade unions, and ultimately boost VW shares.
VW’s preference shares, down about 34 per cent since the crisis broke, were up 1.6 per cent at 107.55 euros at 1240 GMT (6:10 p.m. in India).
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 100 million euros 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 100 million euros, 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.