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VW Expected to Suspend 5-Year Investment Budget
Volkswagen AG’s supervisory board plans on Friday to suspend the company’s rolling five-year investment budget as it girds for the impact of massive recalls to fix more than 11 million vehicles that don’t meet emission standards.
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Volkswagen AG’s supervisory board plans on Friday to suspend the company’s rolling five-year investment budget as it girds for the impact of massive recalls to fix more than 11 million vehicles that don’t meet emission standards.
Sources tell Bloomberg News the 20-member board may agree to shorten the investment plan to three years or less to give the company more financial flexibility.
VW faces what some analysts say could be €25 billion in regulatory fines, lawsuits and repairs related to excessive emissions from diesel and gasoline vehicles. This week VW launched meetings with multiple banks to arrange for as much as €20 billion in short-term loans to preserve its liquidity.
The group’s investment budget, previously set at more than €17 billion ($18 billion) per year, covers more than 300 models made by its 12 brands. Arndt Ellinghort, an analyst with Evercore ISI, tell Bloomberg that VW’s cost base has “gone terribly wrong” over the past five years. He figures the group’s budget has ballooned by two-thirds since 2010 and could safely be cut 10%.
VW brand operations already has vowed to reduce its annual spending by €1 billion.
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