Volkswagen Reduces 2016 Investment Plan Commitment by $1.1 Billion

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PRAGUE, CZECH REPUBLIC - OCTOBER 1: Volkswagen car maker logo on a building of dealership on October 1, 2015 in Prague, Czech republic.

Automaker Volkswagen (ETR:VOW3) has announced that the company plans to cut 2016 investment plans by over €1 billion. The company’s board stated that the carmaker is bracing for penalties due to the emissions scandal that took place this year.

The supervisory board noted that spending will be capped on property to approximately €12 billion instead of the planned €13 billion cap. This will reduce the spending on property by roughly 8% in 2016.

Many analysts predict that the company is facing nearly €40 billion or more in costs related to the scandal. These costs are broken down into fines, vehicle refitting and lawsuits that are pending against the company. This marks the biggest crisis for the company in its 78-year existence. Making matters worse, the company was caught overstating the fuel efficiency of many of the vehicles in its fleet.

Matthias Mueller, CEO of Volkswagen, states that the company is operating in uncertain and volatile times.

Volkswagen has routinely planned out their investments years in advance. Surprisingly, the company has only provided a one-year investment projection. Analysts have been calling for VW to reduce costs and spending to become more efficient and align its profit margins with that of its rivals.

The emissions scandal will allow the company to take a tougher stance to cut costs, and boost revenue in the coming years.

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