Cost-cutting measures underway for VW

ONE of the most senior figures on the Volkswagen Group board has indicated that the company has found almost half of a proposed €5 billion ($A7.3b) spending cut that was flagged in November last year, but which has been accelerated in the wake of the diesel emissions scandal.

Supervisory board member Bernd Osterloh told journalists in Wolfsburg last week that the Volkswagen brand will reduce its variant lines and scale back on trim options, measures that are set to save the beleaguered company €1.9 billion ($A2.8b).

“We from the works council have long flagged the huge range of model variants and different components,” said Mr Osterloh. “That brings enormous complexity and adds to costs, for example, for logistics. We can take out costs there on a large scale and don’t have to talk about job cuts.” The plans come on top of an already announced $A2.1 billion cutback to Volkswagen’s annual $A20 billion research and development budget, with all non-essential projects and even the bonuses of board members coming under scrutiny.

Costs continue to pile up for the group while it has set aside almost $A11 billion to pay for the repairs to more than 11 million vehicles affected worldwide, VW has conceded that this will not cover the expected outgoings.

Legal bills are set to skyrocket, as well, with class actions continuing to mount up around the world – including at least two in Australia.

Revelations that the United States Environmental Protection Agency (EPA) has also targeted the group’s new-generation six-cylinder turbo-diesels for having cheat code software have met with steady denials from VW Group, but it will still need to spend tens of millions of dollars in reparation work to reprogram the ECUs of affected cars in the US.

The cars have been on stop-sale, further adding to the company’s woes in the US. Worldwide, the group has delivered 8.26 million cars for 2015 to the end of October, which is 1.7 per cent off on the 2014 figure.

More ominously, the group reported that sales of Volkswagen-branded cars fell 5.4 per cent year on year, in the first full month of sales since the scandal broke in late September.

Spending cuts are also reaching marketing and motorsport activities, with Porsche and Audi both announcing reductions to their Le Mans racing programs for 2016. Porsche won the event in 2015 with a petrol-electric hybrid, while Audi’s diesel-electric hybrid car has dominated the event for almost a decade.