VW will delay projects to cope with diesel scandal
Tue, Oct 6 2015"We will review all planned investments, and what isn't absolutely vital will be canceled or delayed," Mueller said while addressing the embattled company's employees. The former Porsche boss also said the money set aside by the German giant – about $7.29 billion – won't be enough to cover recall expenses, fines from governments in affected countries, and the expected deluge of lawsuits from disgruntled TDI owners. According to Bloomberg, that figure probably won't even be enough to match the fines Uncle Sam is likely charge, pegged to be around $7.4 billion, according to one analyst.
It's expected that VW could delay a further push for share in the North American market, which would include a $1-billion investment in its Puebla, Mexico, factory. But it will take more than cancellations and delays, analysts claim.
"It's going to be tough to find projects they could chop that will actually move the needle," JPMorgan Chase's Jose Asumendi told Bloomberg. "What they really need to do is get costs under control."
That, according to Bloomberg, is already setting up a showdown between management and labor. The latter wants a reduction in VW's $17.4-billion research-and-development budget – the world's largest and more than what Ford and General Motors spend combined – while the former wants to slash personnel costs. Bloomberg also spoke to analysts who claimed the company should look into reductions in purchasing costs as well as trimming sponsorships.
It's impossible to know just how extreme Volkswagen will need to get with cancellations, delays, and cost-cutting, but it's becoming increasingly clear that the effects of this scandal will likely be felt far longer than the controversies that surrounded other automakers like General Motors and Toyota.
Related Video:
- News Source: Bloomberg
- Image Credit: John Macdougall / AFP / Getty Images
- Earnings/Financials
- Green
- Plants/Manufacturing
- Recalls
- Volkswagen
- Diesel Vehicles
- vw diesel scandal
- matthias mueller
By Brandon Turkus
See also: VW offers $2,000 to keep owners loyal, The tumultuous history of the diesel engine, VW brands excluded from Wards 10 Best Engines for 2016.