As it gets set to present U.S. regulators with plan to fix its diesel vehicles, Volkswagen announced plans to cut its capital spending by €1 billion ($1.4 billion Cdn) next year.
CEO Michael Mueller said the German car-maker will cancel or postpone investments that aren't "absolutely necessary" to help it cover the costs of recalling and repairing millions of vehicles that emit too much pollution because of illegal software that turns off emissions controls.
"We're driving cautiously over the coming months, but we know where we want to go and we want to ensure that the Volkswagen company comes out of the current situation strengthened," he said short statement after a board meeting at company headquarters.
He said capital spending for next year would be €12 billion ($17 billion), with plans for a new design centre and an all-electric Phaeton sedan put on hold.
The car maker has set aside €6.7 billion ($9.5 billion) to cover the cost of a recall of 11 million diesel vehicles worldwide, but the scandal has since widened to include some gas-powered vehicles. The company also faces legal costs and lawsuits.
U.S. regulators demand fix
The U.S. Environmental Protection Agency and the California Air Resources Board have given Volkswagen until Friday to present a plan to fix the 500,000 vehicles on U.S. roads.
An additional 100,000 diesel vehicles are affected in Canada.
The diesel models emit more nitrogen oxide, a gas that causes smog and can lead to respiratory effects, than is allowed by law.
The fix will likely involve a bigger exhaust system to filter out nitrogen oxide and there are fears that could lower the gas mileage of the vehicles, which has been one of their selling points.
The alternative is a chemical treatment process that cuts pollution, which may be difficult to install.
In either case, it will have to meet the scrutiny of U.S. regulators, who have stepped up their monitoring of emissions controls since the scandal, testing models of every diesel vehicle on the road.
Volkswagen shares were up two per cent in trading on Friday after a German magazine reported there may be an easy fix to the diesel cars with a piece of hardware that is simply installed.
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