Volkswagen slashes spending amid emissions scandal – USA TODAY
Volkswagen is slashing its capital spending by $1.1 billion annually, reflecting the latest sign that the German automaker’s emissions scandal is siphoning resources away from product planning and investment.
The move comes as the total cost of the company’s emissions scandal remains profoundly uncertain, though one analyst recently pegged it at more than $21 billion.
The immediate cuts include an indefinite delay of the next-generation version of the company’s Phaeton electric vehicle, a pause in construction of a new design center in Germany and a potential change to plans for a paint shop in Mexico.
Volkswagen CEO Matthias Mueller had pledged a comprehensive review of the company’s spending priorities. On Friday he announced plans to reduce the company’s annual capital expenditures from $13.9 billion to $12.8 billion.
“We are operating in uncertain and volatile times and are responding to this,” Mueller said in a statement. “We will strictly prioritize all planned investments and expenditures. As announced, anything that is not absolutely necessary will be cancelled or postponed.”
At the same time, Mueller said Volkswagen would boost its spending on alternative drivetrain vehicles by $107 million per year, with an emphasis on electric vehicles for the Volkswagen, Audi and Porsche brands.
“We are not going to make the mistake of economizing on our future. For this reason we are planning to further increase spending on the development of e-mobility and digitalization,” he said.
Volkswagen has admitted fitting up to 11 million diesel cars worldwide with software that cheated emissions standards and, separately, has acknowledged that another 800,000 vehicles had higher carbon emissions than it had previously reported.
The spending cuts come after a period of ballooning costs for Volkswagen, where capital expenditures nearly tripled in eight years, Sanford Bernstein analyst Max Warburton noted last week in a research report.
Although capital spending is a problem, the company’s bloated manufacturing footprint is even more problematic.
Volkswagen produces 13 vehicles per year for every workers, compared to 28 for Toyota, its rival for the title of world’s largest automaker.
But reducing labor costs is exceptionally difficult in Germany, where laws protect workers from swift cuts and unions wield considerable political leverage.
“Tackling labour productivity is probably impossible” for VW, Bernstein, a European analyst, said in his report. “With the labour unions more powerful than ever, headcount may be difficult to touch.”
Follow USA TODAY reporter Nathan Bomey on Twitter @NathanBomey.