Skip to main content
Sister Publication Links
  • Automotive News
  • Automobilwoche
  • Automotive News Canada
  • Automotive News China
Subscribe
  • Subscribe
  • Newsletters
  • Login
  • HOME
    • Latest news
    • Automakers
    • Suppliers
    • New Product
    • Environment/Emissions
    • Sales By Market
    • On The Move
    • Auto Shows
    • Munich Auto Show
    • Geneva Auto Show
    • Paris Auto Show
    • Beijing Auto Show
    • Shanghai Auto Show
  • Features
    • Long Read
    • Interview of the Month
    • Focus on Electrification
    • Focus on Technology
    • Segment Analysis
    • Cars & Concepts
    • Supplier Spotlight
    • Europe By The Numbers
  • Opinion
    • Blogs
    • Commentary
    • Guest columnists
  • Photos
    • Photo Galleries
    • Geneva Photo Gallery
    • Beijing Photo Gallery
    • Frankfurt Photo Gallery
    • Paris Photo Gallery
    • Shanghai Photo Gallery
  • Podcasts
  • Car Cutaways
  • EVENTS
    • ANE Congress
    • ANE Rising Stars
    • ANE Eurostars
  • More
    • Publishing Partners
    • Social Media
    • Contact Us
    • Media Kit
    • About Us
    • Capgemini: Invent Head on automotive takeaways from CES 2023
    • Capgemini: Securing the industry's future through a radical rethink
    • Capgemini: Succeeding with the automated driving journey through AI
    • Capgemini: The circular economy is spurring new thinking on EV batteries
    • Capgemini: Toyota and Capgemini leaders on how OEMs can handle industry changes and succeed
    • HEXAGON: Plugging into data is the only way to make winning EVs
    • TUV Rheinland: Ideas, services and certifications for smart mobility
    • TUV Rheinland: Testing of automated and autonomous vehicles on test tracks
    • Toyota Europe
    • UFI Filters
    • Facebook
    • Instagram
    • LinkedIn
    • Twitter
MENU
Breadcrumb
  1. Home
  2. Automotive News Europe
October 06, 2015 01:00 AM

VW CEO Mueller warns staff of 'painful' cutbacks

  • Tweet
  • Share
  • Share
  • Email
  • More
    Print
    Mueller: "What isn't absolutely vital will be canceled or delayed."

    BERLIN (Bloomberg) -- Volkswagen Group CEO Matthias Mueller said the automaker will delay or cancel non-essential projects as pressure mounts to slash spending in the wake of the diesel-emissions scandal.

    "We will review all planned investments, and what isn’t absolutely vital will be canceled or delayed," Mueller told some 20,000 employees at the company's headquarters in Wolfsburg, Germany, today, according to an e-mailed statement of his remarks. "And that's why we will re-adjust our efficiency program. I will be completely clear: this won't be painless."

    Fixing some 11 million rigged diesel vehicles is a costly prospect. The 6.5 billion euros ($7.29 billion) Volkswagen already set aside for repairs won’t be enough to cover fines and potential legal damages as well, Mueller said.

    The company is exploring options from a simple software upgrade to outright replacing some cars. Fines may reach $7.4 billion in the U.S. alone, according to analysts from Sanford C. Bernstein.

    VW could put a push to gain market share in the North America on hold as long as there is no clarity on the extent of the costs of fixing the cars and potential fines, said Jose Asumendi, a London-based analyst at JPMorgan Chase & Co.

    The company outlined plans in March for an investment of about $1 billion to expand its vehicle assembly plant in Mexico's Puebla state. That work could face a delay, Asumendi said.

    "It's going to to be tough to find projects they could chop that will actually move the needle," Asumendi said. "What they really need to do is get costs under control."

    Labor leaders are pushing VW to reel in research and development spending to protect jobs, while management wants personnel expenses reduced as well, people familiar with the situation said before Mueller’s statement.

    Other options include lowering purchasing expenses and reducing sponsorship activities, with the extent of the measures dependent on the cost of the cleanup, said the people, who asked not to be named because the talks are private.

    "We will pay extra attention to bonus payments to members of the management board," Bernd Osterloh, a supervisory board member and head of the works council, told employees at the today's meeting. All projects and investments will need to be examined, and “we will have to question everything that’s not economical,” he said.

    VW shares rose 1.1 percent to 94.55 euros at 1:27 p.m. in Frankfurt. The scandal has wiped some 29 billion euros off Volkswagen’s market capitalization.

    'Incredibly inefficient'

    VW may be forced to tighten an “incredibly inefficient” organization and lop funding out of a $17.4 billion research and development budget that was the world’s biggest last year, about equal to the combined figure for Apple and Google, said Arndt Ellinghorst, a London-based analyst with Evercore ISI.

    Volkswagen’s R&D spending was higher than at Ford Motor Co. and General Motors Co. combined.

    “Where’s the innovation? Obviously not in diesel engines,” Ellinghorst said. “There’s a culture of spending and a lack of focus on efficiency in favor of striving to be bigger.”

    Volkswagen’s personnel costs at 16.7 percent of sales are the highest since 1997, while purchasing costs are also at a peak, he said. Half the company’s board is composed of labor representatives, and more than 60,000 people work for VW in Wolfsburg.

    Secure jobs

    The government of Lower Saxony, where VW is based, also has an unusually strong position of leadership in the company and owns about one-fifth of its voting shares. The government must “work with all its strength to secure these jobs,” Lower Saxony Prime Minister Stephan Weil wrote employees in an Oct. 5 letter.

    Discussions over savings at Volkswagen are in early stages as the company focuses on repairs to satisfy regulators, the people familiar with the situation said. The company has until tomorrow to present a plan for fixing some 2.8 million diesel vehicles it sold in Germany.

    About 8 million of the Volkswagen cars that had software designed to cheat U.S. emissions tests were sold in Europe, the company told German lawmakers in an Oct. 2 letter.

    RECOMMENDED FOR YOU
    2022 Eurostar winner Enrico Salvatori of Qualcomm
    Related Articles
    Continental defends software caught up in VW emissions crisis
    VW says 8 million cars in EU are affected by cheat software
    VW considers diesel fixes ranging from upgrade to new car, report says
    Pischetsrieder, Bernhard deny involvement in VW diesel scandal
    VW under pressure for answers as emissions scandal deadlines loom
    Recommended for You
    Enrico Salvatori
    2022 Eurostar winner Enrico Salvatori of Qualcomm
    Christian Dahlheim
    2022 Eurostar winner Christian Dahlheim of VW Financial Services
    Milan Nedeljkovic
    2022 Eurostar winner Milan Nedeljkovic of BMW
    Capgemini Invent Head on automotive takeaways from CES 2023
    Sponsored Content: Capgemini Invent Head on automotive takeaways from CES 2023
    Sign up for free newsletters
    EMAIL ADDRESS

    Please enter a valid email address.

    Please enter your email address.

    Please verify captcha.

    Please select at least one newsletter to subscribe.

    You can unsubscribe at any time through links in these emails. For more information, see our Privacy Policy.

    Get Free Newsletters

    Sign up and get the best of Automotive News Europe delivered straight to your email inbox, free of charge. Choose your news – we will deliver.

    You can unsubscribe at any time through links in these emails. For more information, see our Privacy Policy.

    SUBSCRIBE TODAY

    Get 24/7 access to in-depth, authoritative coverage of the auto industry from a global team of reporters and editors covering the news that’s vital to your business.

    SUBSCRIBE NOW
    Connect with Us
    • Twitter
    • Facebook
    • LinkedIn
    • Instagram

    Founded in 1996, Automotive News Europe is the preferred information source for decision-makers and opinion leaders operating in Europe.

    Contact Us

    1155 Gratiot Avenue
    Detroit MI  48207-2997
    Tel: +1 877-812-1584

    Email Us

    ISSN 2643-6590 (print)
    ISSN 2643-6604 (online)

     

    Resources
    • About us
    • Contact Us
    • Advertise with us
    • Advertise with Us
    • Ad Choices Ad Choices
    • Sitemap
    Awards
    • Rising Stars
    • Eurostars
    • Leading Women
    Legal
    • Terms and Conditions
    • Privacy Policy
    • Privacy Request
    Automotive News Europe
    Copyright © 1996-2023. Crain Communications, Inc. All Rights Reserved.
    • HOME
      • Latest news
      • Automakers
      • Suppliers
      • New Product
      • Environment/Emissions
      • Sales By Market
      • On The Move
      • Auto Shows
        • Munich Auto Show
        • Geneva Auto Show
        • Paris Auto Show
        • Beijing Auto Show
        • Shanghai Auto Show
    • Features
      • Long Read
      • Interview of the Month
      • Focus on Electrification
      • Focus on Technology
      • Segment Analysis
      • Cars & Concepts
      • Supplier Spotlight
      • Europe By The Numbers
    • Opinion
      • Blogs
      • Commentary
      • Guest columnists
    • Photos
      • Photo Galleries
      • Geneva Photo Gallery
      • Beijing Photo Gallery
      • Frankfurt Photo Gallery
      • Paris Photo Gallery
      • Shanghai Photo Gallery
    • Podcasts
    • Car Cutaways
    • EVENTS
      • ANE Congress
      • ANE Rising Stars
      • ANE Eurostars
    • More
      • Publishing Partners
        • Capgemini: Invent Head on automotive takeaways from CES 2023
        • Capgemini: Securing the industry's future through a radical rethink
        • Capgemini: Succeeding with the automated driving journey through AI
        • Capgemini: The circular economy is spurring new thinking on EV batteries
        • Capgemini: Toyota and Capgemini leaders on how OEMs can handle industry changes and succeed
        • HEXAGON: Plugging into data is the only way to make winning EVs
        • TUV Rheinland: Ideas, services and certifications for smart mobility
        • TUV Rheinland: Testing of automated and autonomous vehicles on test tracks
        • Toyota Europe
        • UFI Filters
      • Social Media
        • Facebook
        • Instagram
        • LinkedIn
        • Twitter
      • Contact Us
      • Media Kit
      • About Us