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VW cuts $1.1bn from capex plan over scandal

BERLIN, November 21, 2015

Volkswagen said it has cut  €1 billion ($1.1 billion) from its 2016 investment plan, as the German carmaker braces for a multi-billion-euro hit from its emissions cheating scandal.

The supervisory board of Europe’s biggest car manufacturer said it would cap spending on property, plant and equipment at around 12 billion euros ($12.8 billion) next year, down about eight 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 efficiency in some vehicles.

Analysts have said the scandals 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.

“We will strictly prioritise all planned investments ... anything that is not absolutely necessary will be cancelled or postponed.”

The cut in capital spending (capex) is VW’s first since the height of the financial crisis in 2009.

In previous years, the company has published investment plans for several years ahead.

But yesterday, it only gave numbers for next year, and did not give a figure for research and development, which last year accounted for about a quarter of overall planned spending of 85.6 billion euros for 2015-19.

Bernd Osterloh, VW’s powerful works council chief, said in a statement the supervisory board would take another look at investment and capacity plans at its first meeting next year.

“We will continue to keep a particularly vigilant eye on the job situation,” he added.

“We see risks here at individual sites, especially in the area of temporary employment.”

Some analysts have long urged VW 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 influential trade unions, and ultimately boost VW shares.

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, while the construction of a paint shop in Mexico was under review.-Reuters




Tags: Volkswagen | Europe |

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