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Embattled German carmaker Volkswagen has announced a 1 billion euro ($1.07 billion) reduction in its annual capital expenditure and said it will focus more on the next generation of driving technology.
The announcement Friday comes in the wake of its emissions scandal, with new CEO Matthias Mueller saying the company is responding to "uncertain and volatile times. "
"We will strictly prioritize all planned investments and expenditures. As announced, anything that is not absolutely necessary will be canceled or postponed," he said after a regular meeting of the company's supervisory board, according to a press release.
The aim is for planned investments in property, plant and equipment, investment property and intangible assets, excluding capitalized development costs, to be capped at approximately 12 billion euros next year. This is down from its average of 13 billion euros per year.
The construction of a planned new design center in Wolfsburg is being put on hold and the construction of a paint shop in Mexico will be reviewed. A successor to its Phaeton model is also being delayed.
The costs reductions came alongside an intention to increase expenditure on alternative drive technologies by approximately 100 million euros next year.
"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", Mueller said.
VW will now focus on developing electric drive systems for the its Volkswagen passenger cars, as well as its Audi and Porsche brands.
Examples of the increased spending include the next-generation Golf, the Audi Q5 and a production plant in Poland.
The announcements on Friday have been prompted by the company's emissions scandal. VW is seen as needing to slash costs in an effort to cope with the financial fallout from the crisis.
The scandal affects around 11 million vehicles worldwide and has forced the group to take extensive measures to save its reputations and shore up balance sheets. It admitted on September 18 it used illegal software to manipulate emissions tests on diesel vehicles in the U.S., sparking the biggest business crisis in its history.
The admission has seen the automaker's share price tumble over 35 percent in the last three months, as well as forcing out its long-time chief executive and sparking investigations and lawsuits across the world.
Shares traded around 1.4 percent higher after the firm announced the cuts, having traded up 1 percent ahead of the announcement.