Volkswagen says it will cut planned spending on models, technology and production facilities at the VW brand by $1.1 billion a year through 2019 as well as develop new hybrid and electric vehicles as part of efforts to contain the fallout of a scandal in which cars were found to be equipped with computer software that let them evade U.S. emissions tests.
The spokesman declined to say what the original investment plans were, but in November, Volkswagen announced $97 billion of investments across the group from 2015 to 2019, with half earmarked for modernizing and expanding the model range.
Volkswagen's flagship brand plans to change its diesel technology in Europe and North America, with division head Herbert Diess saying in a statement that the company will adopt selective catalytic converter technology, or SCR. That is a system that injects urea into the exhaust stream to neutralize harmful nitrogen oxides.
Diess said that change would come "as soon as possible" and that the company would reduce spending on investments by $1.1 billion and redouble efforts to cut other costs.
Europe's largest carmaker will expand its modular construction system — which involves sharing technical specifications and parts across models to save money — to include new plug-in hybrid and electric vehicles.
The company additionally plans to turn the next version of its large Phaeton luxury sedan into an electric-only vehicle to demonstrate the company's technological competence. The Phaeton, a project introduced by former CEO Ferdinand Piech, has been criticized as a money loser.
Volkswagen AG, whose other brands include Audi and Skoda, is facing a crisis after U.S. authorities said it evaded emissions checks on 482,000 vehicles. The company has set aside $7.3 billion to cover the costs of recalls and fines. But analysts say the costs in terms of fines and lost sales will likely be considerably higher.
The company has said it may have to refit up to 11 million diesel vehicles that could contain cheat software, with about 5 million of those from the VW brand.
Germany's ZEW think tank said on Tuesday its economic sentiment index has plummeted to its lowest level in a year, in part because of the uncertainty surrounding the auto industry, which employs more than 750,000 people in the country and is a major source of export income.
But Economy Minister Sigmar Gabriel said he did not think Volkswagen's problems would do lasting damage to Germany, Europe's largest economy. The scandal has forced out VW's longtime chief executive and rocked both the global car industry and the country's economy.
Earlier, Gov. Stephan Weil of Germany's Lower Saxony state, which holds a 20 percent stake in Volkswagen, said the automaker should have admitted earlier that it manipulated emissions data in the U.S. The company acknowledged the deception to U.S. regulators on Sept. 3, more than a year after researchers published a study showing the real-world emissions of two VW models were far higher than allowed.
He told his state legislature on Tuesday that "this confession should clearly have come a great deal earlier — another serious mistake," news agency DPA reported.
Weil sits on Volkswagen's board of directors. He has said that the state's representatives were "completely surprised" by the emissions scandal and vowed to work to protect jobs.