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“We must make massive savings:” Volkswagen CEO warns of huge cuts over scandal

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Volkswagen

LONDON  — Volkswagen will have to make massive savings to cope with the huge cost of its emissions cheating scandal.

That was the stark message delivered to more than 20,000 Volkswagen employees by the group’s new chief executive, Matthias Mueller, at a meeting in Germany on Tuesday.

A former Porsche chief, Mueller took over as CEO of the giant automaker after Martin Winterkorn stood down when it became clear the group had cheated emissions tests on as many as 11 million diesel vehicles worldwide.

Mueller said Volkswagen would survive, but warned the road to recovery would be painful.

“We must make massive savings to manage the consequences of this crisis,” he told staff.

The group is racing to design a technical fix for the vehicles, which are spread across four brands — VW, Audi, Skoda and SEAT — and many model variants and markets. Some will need a software upgrade, others new hardware.

Volkswagen has set aside 6.5 billion euros ($7.3 billion). But the final bill is likely to be several times that amount due to the cost of recalls, legal action by authorities, customers, dealers and shareholders, and the impact of lost business.

“While the technical solutions to these problems are imminent, it is not possible to quantify the commercial and financial implications at present,” Mueller said.

As a result, the company will intensify its “efficiency program” and cancel, or postpone, any investments deemed not absolutely essential to its future.

Credit Suisse said last week that Volkswagen may face costs totaling 78 billion euros ($87 billion) in a worst case scenario. Even the bank’s most cautious estimate — 23 billion euros — is much higher than Volkswagen’s current provision.

Mueller made no mention of job cuts on Tuesday but it’s hard to see how the company can avoid them. Volkswagen employs about 600,000 people around the world, more than a third of them in Germany.

Volkswagen said it would present a technical solution to regulators for approval shortly and inform affected customers in the coming days that their vehicles need a refit.

3 comments

  • Fred

    I feel bad for the workers who will lose their jobs ‘to achieve cost savings’. We all know this is going to happen! Every big company out there will throw the low level workers and managers under the bus to boost profits and save the paychecks of the upper management team. I’d like to know how many of the million $$$ a year club executives will take a pay cut even though they most likely knew about the scam….probably none. They’ll get a bigger bonus than last year if they cut enough costs (jobs).

  • john..

    they alway protect what they have..they won;t hurt a bit over this…only the working folks will feel the pain of this..the lies and missmanagement from another company..to boost profits for wallstreet and upper management…

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