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Volkswagen's recovery won't be easy, CEO tells workers

Volkswagen Chief Executive Matthias Mueller predicts the company's recovery from its diesel emissions scandal 'wont be painless.' The automaker's future investments are being reconsidered as the automaker deals with the financial fallout. 

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    A Volkswagen logo is seen on a freight car at the VW factory in Zwickau, Gemany, Monday, Oct.5, 2015.
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Volkswagen Chief Executive Matthias Mueller warned a group of 20,000 workers to expect some financial turbulence as VW recovers from the fallout from falsifying emissions tests on millions of its diesel vehicles.

Speaking at the VW headquarters in Wolfsburg, Germany on Tuesday, Mr. Mueller delivered a speech to staff that was grim and honest. It possessed the first public admission that the emissions scandal – which involved software installed in Volkswagen cars designed specifically to cheat tests from environmental regulators – could have a lasting impact on the German car company.

“I will be very open: This won’t be painless,” Mr. Mueller said about the company’s recovery, according to BBC News.

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Volkswagen is considering large cutbacks and putting all investments under scrutiny. The new CEO, who recently replaced Martin Winterkorn after he stepped down in the wake of the scandal, indicated that the company would be reconsidering future investments in plants, research and development, and vehicles.

“What is not urgently needed will be scrapped or delayed and therefore we will adjust our efficiency program,” The BBC News reported Mueller telling the crowd.

The Wolfsburg plant is home to over 60,000 Volkswagen employees, about 10 percent of its total workforce. Many workers in the audience wore t-shirts that read “One team – one family” in solidarity with the company. The jobs of those workers are safe, for now.

Bernd Osterloh, the head of VW’s works council, admitted to the Associated Press the scandal would impact bonus payments for workers, but said there were no immediate plans to cut staff. He could not speak to the medium to long-term impact on jobs.

Osterloh was quick to point out that solidarity works both ways. “We assume that, for reasons of decency, the management board’s bonus will in case of doubt fall in the same way as the workforce’s bonus,” he said to the Associated Press.

The full scope of the financial impact the emissions scandal will have on Volkswagen remains to be seen. According to Reuters, analysts believe that Volkswagen will cut back on expanding into emerging markets in China and South America, rather than sell parts of the business or cut down on research and development, to pay its fines and litigation fees. However, full predictions are waiting until the European extent of the scandal is clarified.

"If the issue is just limited to the U.S. ... then the financial consequences may be containable. But if VW also cheated in Europe, then the situation will become much graver,” Bernstein analyst Max Warburton wrote in a research note, according to Reuters.

Volkswagen has an Oct. 7 deadline to provide a timeline to Germany’s KBA regulator for bringing diesel emissions back under legal limits. 

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