Volkswagen’s largest business by revenue‚ its namesake passenger-car brand that originated the Beetle‚ on Tuesday pledged a package of cost cuts and sweeping changes to its model and diesel strategy in the wake of the emissions scandal that has gripped the company.
The VW brand‚ which sold 4.6-million cars in 2014 and generated nearly 100bn in revenue‚ will slash its annual capital spending by 1bn as part of the company’s broader cost-reduction plans. VW has said it will accelerate cost-cutting efforts and likely will scrap some projects it no longer considers a priority.
The moves come as Europe’s largest auto maker has promised to slash its overall costs by at least 10bn a year by 2018. VW is expecting massive costs from regulatory fines‚ law suits and new diesel technology in the wake of its admission last month that it cheated on emissions tests. In response‚ VW is ramping up plans to develop electric vehicles and is scrapping existing emissions technology in its diesel engines in favour of more expensive AdBlue and selective catalytic reduction‚ or SCR‚ technology to reduce nitrogen oxide emissions.
“It was decided to switch over to installing only diesel drives with SCR and AdBlue technology in Europe and North America as soon as possible‚” the company said in a statement. “Diesel vehicles will only be equipped with exhaust emissions systems that use the best environmental technology‚” it added. AdBlue is a fluid based on urea that is injected into the exhaust pipeline where it vaporises and neutralises the nitrogen oxide in the catalytic converter. In 2007‚ VW scrapped a similar technology called BlueTec that was licensed from rival Daimler in favour of a less expensive system.
Last month‚ VW admitted that its EA 189 diesel engine with that less costly system didn’t meet US emission standards‚ so the company installed software on the engine’s controller to deceive emissions testers. The AdBlue and SCR procedure is considered the best way to reduce toxic tailpipe emissions‚ but it is more expensive than the method VW chose in the past for its TDI diesel engines. The switch to AdBlue and SCR is a major change for VW and would appear to be an acknowledgment that its existing so-called lean nitrogen trap technology can’t meet strict US restrictions on tailpipe emissions.
The scandal also is forcing VW to accelerate plans to develop battery-driven and hybrid electric vehicles. The company announced it will develop a common platform for sharing electric vehicle components across its various models and brands and offer a new generation of all-electric cars that can travel over 480km on a single charge. In a move designed to challenge US electric-car maker Tesla Motors‚ VW will reposition its Phaeton sedan as an ultraluxury high-tech ride that “features a pure electric drive with long-distance capability‚ connectivity and next-generation assistance systems as well as an emotional design.”
The Phaeton‚ a pet project of former Supervisory Board Chairman Ferdinand Piëch‚ has been a loss-maker and it was widely expected that the expensive model would be scrapped. It isn’t currently sold in North America. The decision shows that VW will retain to the symbolic high-tech projects crucial to its branding‚ despite last week’s decision to slash costs and focus on necessary projects in light of still unforeseeable costs related to the scandal.
“We are very aware that we can only implement these innovations for the future of the VW brand effectively if we succeed with our efficiency programme and in giving our product range new focus‚” said VW brand chief Herbert Diess in a statement.
-Wall Street Journal