The Chief Executive Officer of Volkswagen AG, Matthias Mueller announced that the automaker is delaying or cancelling projects that are deemed non-essential.
The scandal concerning the rigged diesel emissions of approximately 11 million Volkswagen vehicles is pushing the company into slashing spending and controlling costs more tightly. A fragment of Matthias Mueller’s reads:
“We will review all planned investments and what isn’t absolutely vital will be canceled or delayed. And that’s why we will re-adjust our efficiency program. I will be completely clear: this won’t be painless”.
The Tuesday announcement was made at the company’s headquarters, in front of 200,000 employees. It is expected that the diesel emissions scandal will cost Volkswagen AG over the budget the company has set aside. This amounts to 6.5 billion euros. Yet, fixing or replacing 11 million diesel vehicles is estimated to go far beyond this sum. Particularly since legal actions are also expected. Only in the U.S., the automaker is facing 7.4 billion dollars in fines, according to Sanford C. Bernstein Ltd. analysts.
As things haven’t settled in yet, there is little indication on what projects could be delayed or canceled. Further details are expected to be revealed over the following days or weeks. According to one analyst at JPMorgan Chase & Co., Volkswagen AG could delay the implementation of the expansion plans at the Puebla, Mexico assembly line. In March, the German automaker has announced plans to invest 1 billion dollars here for expansion.
According to unnamed sources cited by Bloomberg, Volkswagen AG management is planning to cut personnel expenses. At the same time, there is pressure from labor leaders to take funds from the research and development sector in order to protect jobs.
Another standing option for the German automaker is to reduce purchasing expenses. At the same time, they could withdraw from sponsorship activities. Yet, all these measures are unconfirmed. Until the cost of the scandal is not settled, joggling options will go on.
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