Volkswagen cuts costs to deal with emissions scandal

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LONDON (CNNMoney) — Volkswagen is cutting back on its investment plans next year as it continues to grapple with the cost of its emissions scandal.

The German automaker will cut investments by one billion euros ($1.1 billion), or about 8%, to 12 billion euros.

The cuts mean the company must hold off on construction of a new design center in Volkswagen’s hometown of Wolfsburg, Germany.

It will also delay plans for its next Phaeton model, which was slated to be an electric-only model.

It may also scrap plans for a paint factory in Mexico where it produces Beetle, Jetta and Golf models.

“We will strictly prioritize all planned investments and expenditures … Anything that is not absolutely necessary will be canceled or postponed,” said the automaker’s new CEO Matthias Mueller after a high level meeting Friday.

Mueller said more cuts could be announced in the coming weeks but he did not announce any job losses Friday, as some workers had feared.

“We are not going to make the mistake of economizing on our future,” he said, noting that the automaker will still direct money towards developing new technologies and will continue with joint-venture plans in China.

Volkswagen’s global car sales plunged 5.3% in October after the company admitted to rigging pollution tests on millions of its vehicles.

It fitted as many as 11 million diesel vehicles worldwide with software that was designed to cheat nitrogen oxide emission tests.

The company said it will cost at least 8.7 billion euros ($9.3 billion) to recall vehicles and deal with the consequences related to the cheating scandal.

But analysts warn the total cost is likely to run into tens of billions of euros once fines, penalties and compensation are included.