VW mulls behemoth overhaul to trim costs

FACED with billions of euros in costs for its emissions cheating scandal, Volkswagen (VW) may have to consider an overhaul of a 12-brand empire built in the last two decades that makes everything from cheap cars to motorbikes to heavy trucks.

While VW in the past could afford to prop up financially struggling divisions such as the Spanish Seat unit, Bugatti super-car nameplate and MAN heavy trucks with robust profit from Porsche and Audi, that money will now need to help cover costs linked to the crisis.

“VW has several brands that fall into the ‘nice to have’ category,” said Stefan Bratzel, the director of the Center of Automotive Management at the University of Applied Sciences in Germany, who estimates the scandal will cost VW as much as € 30 billion (R447bn). “Bugatti, Lamborghini, Ducati too – they’re not core to the company in terms of making money.”

New chief executive Matthias Müller said this month that, while VW did not need a revolution, he was delaying or cancelling non-essential projects to cut costs, following the disclosure that VW had cheated on US diesel emissions tests.

Recall

The car maker last week announced a recall of 8.5 million diesel vehicles in Europe, and Müller says the fallout from the scandal will cost more than the € 6.5bn the car maker has already set aside.

The Italian motorbike maker, Ducati, was added in 2012 at a cost of € 860 million to complement a stable of ultra-luxury brands that included Italian sports-car manufacturer Lamborghini, UK premium brand Bentley and Bugatti.

VW may also take a closer look at the structure of its heavy trucks unit. After purchasing Scania in Sweden and MAN in Germany, the car maker has yet to succeed in realising any significant cost efficiencies between the two name plates.