Business Technology

Tuesday 25 October 2016

VW identifies €1.9bn in cost savings to offset fines

Christoph Rauwald

Published 29/11/2015 | 02:30

SAVINGS: Volkswagen executives to reduce costs with lower bonuses
SAVINGS: Volkswagen executives to reduce costs with lower bonuses

Volkswagen AG has identified about €1.9bn in savings at its namesake car brand to help offset fines and recalls stemming from the manipulation of vehicle emissions.

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The VW brand, the carmaker's largest unit, plans to reduce variants and trim options to reduce complexity and cost, top worker representative Bernd Osterloh said on Friday in a briefing with journalists at Volkswagen's headquarters in Wolfsburg, Germany.

The car giant's senior executives are expected to participate in the broader savings effort with lower bonuses.

"We, from the works council, have long flagged the huge range of model variants and different components," said Osterloh, a supervisory board member at Volkswagen.

"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 VW brand targets a total of €5bn in efficiency gains. Herbert Diess, the head of the unit, vowed to accelerate the savings programme amid the mounting costs of the scandal, which is estimated to be at least €8.7bn for the carmaker. The VW brand also plans to reduce investment by €1bn a year.

Volkswagen is grappling with an emissions scandal on three fronts: cheating software installed in about 11 million vehicles worldwide with 1.2, 1.6 and 2.0-litre engines; irregular carbon dioxide ratings on about 800,000 vehicles in Europe; and questionable emissions software in about 85,000 VW, Audi and Porsche vehicles with 3.0-litre diesel engines in the US.

Savings will be key as customers are baulking at buying new VW vehicles because of uncertainty created by the scandal, Osterloh said.

Volkswagen executives have generally downplayed the effect of the revelations over the manipulations on customer behaviour. The manufacturer plans to scale back production to avoid bloating inventory of unsold vehicles, said Osterloh, who represents VW's 600,000 workers to the company's management.

Two weeks ago, the Sunday Independent revealed that the Irish Competition and Consumer Protection Commission (CCPC) is pursuing Volkswagen over the recent emissions scandals at the car manufacturer.

The commission said it has opened a formal investigation in response to last week's admission by Volkswagen that there were "unexplained inconsistencies" in carbon dioxide output and fuel consumption readings that could affect around 800,000 cars sold in Europe.

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