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Volkswagen Group to cut overall spending by ~€1B next year, but to boost investments in electric drive tech by €100M

The Volkswagen Group is cutting its planned investments in its Automotive Division for next year as it girds itself for the financial impacts of responding to the diesel emission issue. The Group will cap planned investments in property, plant and equipment, investment property and intangible assets, excluding capitalized development costs (capex) at approximately €12 billion next year—a cut of about €1 billion from earlier plans.

At the same time, however, the Group intends to increase spending on alternative drive technologies by approximately €100 million next year, with the core focus to be on rapidly developing electric drive systems for the for the Volkswagen Passenger Cars, Audi and Porsche brands, according to Matthias Müller, Chairman of the Board of Management of Volkswagen AG.

We are operating in uncertain and volatile times and are responding to this. We will strictly prioritize all planned investments and expenditures. As announced, anything that is not absolutely necessary will be cancelled or postponed. We are not going to make the mistake of economizing on our future. For this reason we are planning to further increase spending on the development of e-mobility and digitalization.

—Matthias Müller

Most of the capex is earmarked for new products, the continuing rollout and enhancement of the modular toolkits, and the completion of ongoing investments to expand capacity. Examples include product start-ups such as the next-generation Golf, the Audi Q5, the new Crafter plant in Poland, as well as upfront expenditures for the modular electric toolkit (MEB).

Approximately 50% of capex will be spent on the Group’s 28 locations in Germany.

Müller also outlined the first projects as examples where investments are being spread out to a greater extent or cut back. For example, construction of the planned new design center in Wolfsburg is being put on hold, saving approximately €100 million.

In addition, the construction of a paint shop in Mexico will be reviewed. In the model range, the successor to the Phaeton—a pure-play electric model—is being delayed.

We will review and potentially cancel further expenditures or spread them out to a greater extent in the next few weeks, but without putting our future viability at risk. Together with the works council representatives we will make every effort to keep our core workforce on board.

—Matthias Müller

The joint ventures in China are not consolidated and are therefore not included in the above figures. These companies will maintain their previously announced investment levels and are planning expenditures in the amount of approximately €4.4 billion in 2016. These investments will be financed from the joint ventures’ own funds.

Comments

Lad

This just keeps getting worse; In other news VW announced their 3 liter diesels back to 2009 are also involved in the emissions scheme. Where did it all go wrong Alphie?

Alain

That's good news.
They decide to decrease investments in old technology.
If a production plant for "fossil cars" is built today, it will produce ICU's for at least a decade. Any "new" fossil car produced in 2025 will be on the roads for many more years...

Postponing investment in production plants until the switch to electric is made will hasten the transition away from ICU, and reduce the incentives to promote fossil cars.

Trevor Carlson

Alain,
Taking a few steps back to get a bigger picture; such a switch would be a good thing if the sustainability of the entire lifecycle of each product were considered. I'm not so sure the data is conclusive yet that electric vehicles are more sustainable or better for the environment from a full cycle analysis perspective.

From an infrastructure standpoint I agree, fossil fuels will need increasingly expensive technologies to compete while solar and solar/lunar derivative energy sources face a decreasing cost curve to their infrastructures. Fossil fuels themselves are also stored solar energy and the carbon that was sequestered so long ago will eventually be used again to feed the growth of new plants and animals. As we learn to harness the energy around us we will begin to discover and innovate ever faster and more sustainably.

A few steps more and the picture shows that energy is the easy problem to solve... the tough one is sustainable and responsible populations.

As generations of people have utilized the virtually unlimited and low cost energy of fossil fuels, economic and population growth has exploded. Hopefully as the globe tapers off the fossil fuel energy rush we can do so in a sustainable manner as well. So far, most first world nations have bent their population growth curves flatter fairly painlessly (China's and Germany's not among the best practices).

Let's all hope the future transitions for the remaining majority of the earth's population will be similarly slow and steady enough to prevent world wars due to rapid shifts in power and their cascading effects. I fear this is not the case though, we're teetering on the edge of Oil's last hurrah. Every time there has been an energy shift there has been a population boom and draw-down as power structures shift and find a new balance (banking and currency structures).

---(secular short story below)---

Muscle/Wind power was tied to the Grain-Salt-Spices (Gold) currencies powering Egypt, Rome (Silver), Persia also utilized by the Vikings, Dutch [paper bills backed by Gold]. This currency innovation led to the rise of the British Empire [paper backed by Silver] which prevailed even as steam power tipped the scales further in her favor.

Countries rich in wood sources powered another population expansion and greater freedom/power projection (Britain/France/N. America). This was overtaken by coal which most notably worked out to favor England. Coal empowered many innovations and the Pound Sterling was held as a relatively constant currency but it also contributed to innovations in banking/exchanges. Coal began to peak due to petroleum and power shifted again as the financing of the nation state in power also became unstable in part due to monetary exchanges favoring France and Germany. WW1 and WW2 (aka WW1 part 2) saw a major population draw down and a rapid shift in monetary order.

The United States grew in power boosted by petroleum growing its role in international trade. As it did so, the U.S.D. became the international currency (backed by gold). When the system broke down, the dollar was moved to floating exchange rates. We are now deep in the middle-age of multi-currency systems and debt has ballooned so far as to render the banking system so top heavy as to be seemingly unstable. However the US finds new life and continues to innovate and and power global trade as it taps into the natural gas energy boom. (Until Obama shuts it down and empowers the mid-east)

The rise of distributed and renewable power sources in conjunction with crypto-currencies could grow to threaten and possibly topple the multi-currency central banking system model if allowed to naturally progress. As public debt becomes more and more burdensome, people work harder to pay off the debts on a massive scale (higher interest rates and runaway deflation). Then as the nation states, that have tried to inflate their way to further growth, lose leverage they will become oppressive and eventually open the door to popular rebellion and dissolution of those nation states power base. (WW3 and/or global civil wars)

Such a thing could be financed and sparked by non-national elites and a coalition of global companies and/or by the national elites pulling the political strings of unstable regions to cover their moves to expand their power and reach. Who knows what's really going on but change is in the air and the globe is due for another population draw-down. No matter how it happens a few elites will come out on top.

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