VW’s New Chief Says Scandal Will Cost It More Than Expected
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FRANKFURT — Volkswagen’s new chief executive warned on Tuesday that the financial impact from the company’s emissions cheating scandal would be worse than previously acknowledged, forcing the company to curtail investment at a time when all carmakers are trying to keep ahead of a rush of new technology.
The automaker previously said it would set aside 6.5 billion euros, or about $7.3 billion, to cover the cost of bringing vehicles with illegal software into compliance with emissions standards.
“But that will not be enough,” said Matthias Müller, the Volkswagen chief executive, adding that job cuts might be ahead.
“ Volkswagen workers in Wolfsburg, Germany, on Tuesday. The chief, Matthias Müller, said $7.3 billion set aside won’t cover costs. Onscreen is Bernd Osterloh, manager of VW's general works council. CreditRoland Nipaul/European Pressphoto Agency “
Mr. Müller said it was impossible to calculate the cost from penalties that Volkswagen was likely to face from governments — including state and federal authorities in the United States — or from lawsuits that are proliferating from unhappy customers and shareholders. About 11 million Volkswagen diesel vehicles, primarily in Europe and the United States, have software meant to fool emissions tests.
[image credit: www.wsj.com]
For now, the company will review new projects and delay or cancel any that are not considered essential, Mr. Müller said, according to a text of his address to 20,000 employees gathered in a building at the company’s main factory in Wolfsburg, Germany.
His remarks point up how the crisis has expanded and troubled Volkswagen. The scandal might damage not only the company’s current sales and its image, but it could also impinge on its ability to keep current with the fast-changing technology trends, which are forcing carmakers to continually reinvent their vehicles.
Volkswagen could face significant financial restraints as it works on new technologies like self-driving vehicles and battery-powered cars. In addition to those advances, automakers are also bracing for competition from Silicon Valley. Mr. Müller referred to rumors that Apple would begin selling a car in the next few years.
[image credit: www.wsj.com]
“This self-made crisis and its repercussions hit us at a time when mobility is undergoing broad changes,” Mr. Müller said.
On Wednesday, Volkswagen is scheduled to announce how it intends to alter the affected vehicles to meet emissions standards without cheating.
There is deep skepticism within the auto industry that doing so will be easy or even possible. Particularly in the United States, where emissions standards are more stringent than in Europe, some industry experts say it could be hard for Volkswagen to make its cars follow the air-quality rules without drastically diminishing the cars’ performance and fuel economy.
Mr. Müller said that in some vehicles, reprogramming the software would suffice. Some cars will not need any repairs because the illegal software was not activated. But in other cases, the company will need to install new components, he said.
Gennadi Zikoridse, executive director of the Research Association for Diesel Emission Control Technologies in Dresden, Germany, said he thought it would be technically possible to fix the affected vehicles, “but it won’t be simple or cheap.”
Mr. Müller, who was appointed chief executive last month after his predecessor, Martin Winterkorn, resigned, did not rule out job cuts stemming from the damage that Volkswagen has suffered financially and to its reputation.
The company will do everything it can to preserve jobs, Mr. Müller said, but he added: “This will not be a painless process.”
Volkswagen has almost 600,000 workers worldwide, including about 270,000 in Germany. The German work force is concentrated in the state of Lower Saxony, including 72,000 people at the Wolfsburg factory.
Mr. Müller said a substantial number of high-ranking managers had been suspended in connection with what he promised would be a ruthless inquiry into who was responsible for the scandal.
He did not name those executives suspended, but three of them — whose suspensions had been previously disclosed — played prominent roles in the development and deployment of the engines with the software.
They are: Ulrich Hackenberg, head of development for all Volkswagen Group brands, and previously head of development for Volkswagen-brand cars from 2007 to 2013; Heinz-Jakob Neusser, currently head of development for the Volkswagen brand; and Wolfgang Hatz, head of engines and transmissions development for all Volkswagen brands.
(original story from : http://www.nytimes.com/)
