World Economy

VW Identifies $2b in Savings

VW Identifies $2b in SavingsVW Identifies $2b in Savings

Volkswagen AG has identified about $2 billion (€1.9 billion) in savings at its namesake car brand to help offset fines and recalls stemming from the manipulation of vehicle emissions.

The VW brand, the automaker’s largest unit, plans to reduce variants and trim options to reduce complexity and cost, top labor representative Bernd Osterloh said on Friday, Bloomberg reported. The automaker’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 and one of the most power figures 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 €5 billion in efficiency gains. Herbert Diess, the head of the unit, vowed to accelerate the savings program amid the mounting costs of the scandal, which so far tallies at least €8.7 billion for the automaker. The VW brand also plans to reduce investment by €1 billion 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-liter 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-liter diesel engines in the US.

Savings will be key as customers are balking 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 behavior.

To respond to weaker demand, 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.