Tags: VW | volkswagen | Factory Investment | Emissions

VW Cuts Factory Investment by $1B Due to Cost of Emissions Cheat

Image: VW Cuts Factory Investment by $1B Due to Cost of Emissions Cheat

Friday, 20 Nov 2015 08:19 AM

Volkswagen AG cut its annual investment budget for factories and equipment by 1 billion euros ($1.1 billion) as it prepares for the massive cost of fixing about 11 million cars with rigged emissions systems.

The carmaker said Friday it will lower capital expenditures to 12 billion euros on vehicles, factories and equipment next year. The investment plan Volkswagen announced didn’t include development costs, which totaled about 4.4 billion euros a year under its previous budget.

“It’s still a huge amount of investment,” said Arndt Ellinghorst, a London-based analyst for Evercore ISI. “It still leaves them outspending their competitors.”

Prior to the Friday announcement, Volkswagen had more than doubled its annual investment spending since 2008. 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.

Postponing Projects

It has space to cut capital expenditures and development costs by 10 percent, according to estimates from Evercore ISI.

“What we definitely won’t do is make cuts at the expense of our future,” Chief Executive Officer Matthias Mueller said in a press conference at the company’s Wolfsburg, Germany headquarters. What’s not immediately necessary will be canceled or postponed, he said, adding that a new design center in Wolfsburg will be delayed.

The carmaker is facing a Friday deadline to present U.S. and California regulators with a plan to fix diesel vehicles that had software to turn on full emissions-control systems only during pollution tests. The 482,000 affected cars in the U.S. were emitting as much as 40 times the permitted levels of smog- forming nitrogen oxides.

Volkswagen has said it will recall as many as 8.5 million diesel cars in Europe due to the same issue. In the third quarter, it set aside 6.7 billion euros to pay for the diesel recalls, noting that the full cost will probably be higher.

Separately, about 800,000 vehicles also had irregular readings for carbon dioxide. Volkswagen won’t have to recall those vehicles but will have to compensate for higher tax payments and worse-than-promised fuel consumption. The company has estimated the economic risk of the irregularities at another 2 billion euros.


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Volkswagen AG cut its annual investment budget for factories and equipment by 1 billion euros ($1.1 billion) as it prepares for the massive cost of fixing about 11 million cars with rigged emissions systems.The carmaker said Friday it will lower capital expenditures to 12...
VW, volkswagen, Factory Investment, Emissions
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2015-19-20
Friday, 20 Nov 2015 08:19 AM
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