Sri Lanka’s expected inward investment from world’s largest carmaker, Volkswagen AG now appears to be shrouded in a cloud of uncertainty with the automaker today announcing it would “either delay or cancel non-essential projects” to make “massive” cost savings in order to overcome the consequences of the emissions scandal that has engulfed it
Speaking in a televised interview with Bloomberg, Volkswagen AG Chief Executive Officer Matthias Mueller said the company 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 German company’s headquarters Tuesday, 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 Ltd.
Though the 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.
“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,” Bloomberg reported.
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.
Volkswagen has admitted that 8 million vehicles were fitted with software capable of cheating diesel emissions tests in the European Union, a German newspaper said on Monday, citing a letter the carmaker sent to members of parliament.
The letter – dated Oct. 2 and cosigned by the former government spokesman and current VW chief lobbyist Thomas Steg – says that vehicles with 1.2, 1.6 and 2.0 litre engines are affected, daily Handelsblatt reported in an advance copy of its Tuesday edition.
The Volkswagen emissions scandal might cut up to 0.2 percentage points off Czech economic growth in 2016, a Finance Ministry spokeswoman told Czech daily paper Pravo.
Volkswagen, Europe’s biggest carmaker, faces the worst business crisis in its history after it admitted cheating diesel emissions tests in the United States, with 11 million vehicles affected worldwide, including around 1.2 million cars sold under the Czech Skoda brand.