“For too long, VW has been run for global domination and sheer growth rather than efficiency and value creation”, Arndt Ellinghorst, a London-based analyst with Evercore ISI, said in an e-mailed note. “Looking at VW’s cost base one has to conclude that something has gone terribly wrong since 2010”. “It’s urgently needed. The company needs to save, save, save”.
Advertisement
“In light of the current situation and the review of our investments, the company has chose to delay by two or three years the increase of its stake in its joint venture with FAW”, a VW spokesman told AFP. The company’s supervisory board, managers and labor leaders are wrangling over how best to prune an automotive group that spans 12 brands and more than 300 models.
Volkswagen’s CEO says more cute could be announced in the coming weeks.
Mueller said Friday after a meeting of the board at company headquarters in Wolfsburg, Germany, that the cuts would bring capital expenditure down to 12 billion euros next year.
“We will strictly prioritise all planned investments and expenditures”.
Prior to today’s announcement, Volkswagen had more than doubled its annual investment spending since 2008. The lack of steeper cuts suggests how complex it will be to find a clear way out of the crisis stemming from circumventing emissions regulations.
Volkswagen lost 1.67 billion euros ($1.83 billion) in the third quarter, due to largely to recall costs, and it warned that 2015 operating profit would fall significantly. Volkswagen has admitted to installing software that allowed its 2.0 liter diesel models to pass US clean air tests, while shutting off emissions control systems when its diesel cars are actually on the road. Volkswagen won’t have to recall those vehicles but will have to compensate for higher tax payments and worse-than-promised fuel consumption.
Advertisement
Volkswagen, which is set to provide detailed plans to fix vehicles that do not comply with US emissions standards, faced more pressure on Thursday from officials in Washington and California to buy back older diesel cars. Worldwide, there are an estimated 11 million cars with affected EA189 engines, including nearly 100,000 in Australia.
