Volkswagen diesel scandal: reshape through lower investments and switch to electric strategy image

Volkswagen AG’s largest unit – the namesake VW brand – will have to cope with investment cuts of one billion euros ($1.1 billion) annually and a drive to faster develop electric autos.

The company is aiming to come up with a successful strategy to recover from the biggest crisis in its 78-year history, the admission it had rigged diesel emission tests in the US and that it had equipped 11 million autos worldwide with illegal software – a scandal that wiped away around a third of its market value. The German automaker also announced it would hasten the cost cutting process at its VW subsidiary, the main unit in terms of revenue, while also using only the newest and “best environmental technology” for diesel powered vehicles moving forward. “There is a real chance for VW to even extract something positive from the diesel fiasco,” comments Stefan Bratzel, head of the Center of Automotive Management think-tank near Cologne. “Funneling more resources into electric mobility gives them a credible future perspective to try to overcome this crisis.” Analysts also believe a strategy driven by electric and hybrid auto development could step up the recovery process at the company.

But the road ahead is long and possibly treacherous – reports are already putting the namesake division on a loss this year as the unit will have to bear the financial brunt of the costs related to the emissions cheating scandal, nicknamed “dieselgate”. The company announced it would recall 11 million vehicles sold worldwide, around five million of them wearing the VW badge.

Via Reuters