Daily Management Review

Anticipating Business Loss, Volkswagen Cuts Costs, Freezes Recruitment and Cuts Shifts


Anticipating Business Loss, Volkswagen Cuts Costs, Freezes Recruitment and Cuts Shifts
Anticipating high financial losses following the emission scandal, German auto maker Volkswagen has initiated cost cutting measures as the company reportedly readies itself to face potential business losses.

The company has imposed a hiring freeze at its financing business and cut a shift at a German engine factory.

A source familiar with the matter told Reuters that initial findings of an internal investigation into the biggest business crisis in the company's 78-year history was examined by senior officials at the German car maker on Wednesday evening.

The source added that Volkswagen was also getting prepared for an external investigation by a U.S. law firm Jones Day, with an official from that firm to join part of a meeting that was held by the supervisory board's executive committee.

Earlier this month, the largest automaker of the world had admitted that it had used software to cheat on the emission standards of its diesel cars in the United States. Compounding the problem for the flagship German company, the German transport minister had also alleged that the company had manipulated tests in Europe, where Volkswagen sells about 40 percent of its vehicles.

The emission scandal has hit the company hard in terms of its share prices which has witnessed more a one third fall across global markets and the company is still to come to grip with the scandal that has shaken up the auto world.

The company is also set to recall around 11 mission vehicles fitted with the same equipments for refitting and it is expected that this face saving exercise would cost the company a fortune. Coupled with these problems, the company is also expecting a fall in its sale worldwide.

"We are reacting to the current situation. It is a purely precautionary measure," a spokesman of the company said.

The company cut one shift per week at its Salzgitter engine factory that was put in place to initially to meet higher demand.

Identification of those responsible for the scandal and the creation of a new business culture has been promised by Volkswagen’s new Chief Executive Matthias Mueller, who took over from Martin Winterkorn last Friday.

"Those people who allowed this to happen, or who made the decision to install this software -- they acted criminally. They must take personal responsibility," supervisory board member Olaf Lies told the BBC.

Meanwhile, German investigators are probing into Winterkorn, the company CEO for almost nine years, over allegations of fraud. The company has already suspended three top engineers on Monday and two sources familiar with the matter said on Wednesday that communications chief Stephan Gruehsem was expected to step down.

The external investigation into the incident in Volkswagen is being given particular importance by investors as the view the close links that Mueller and chairman-designate Hans Dieter Poetsch has to the Piech-Porsche clan that controls Volkswagen could manipulate internal investigations


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