Car Industry

Volkswagen tightens its belt as Dieselgate spending grows

$175 million sounds like a pretty sweet payday for the lawyers representing TDI owners.

Nick Miotke/Roadshow

Don't expect the financial fallout to magically blow away and be forgotten in a year's time.

Nick Miotke/Roadshow

Volkswagen will pay out tens of billions of dollars for its role in Dieselgate, that much is clear. But while it has the money to do so, it doesn't have an infinite supply of simoleons, and so the belt-tightening begins.

VW CEO Matthias Mueller spoke at an internal meeting and claimed that material and overhead costs need to be reduced by 10 percent in 2017, Reuters reports, citing German outlet Automobilwoche. Mueller claimed the cuts are necessary, despite the hurt it might bring in the short term.

This speech came on the heels of a rather hefty payout to the lawyers representing diesel owners. Late last week, Volkswagen agreed to pay out $175 million to the lawyers suing the company for selling vehicles that polluted in excess of legal limits. That brings VW's total Dieselgate expenditure -- in the US alone, mind you -- to $16.7 billion. (Editor's note: Maybe I should of become a lawyer instead of a reporter).

There's still plenty of spending left to do, which is why VW is so concerned about cutting costs in other areas. Regulators have yet to decide what to do with VW's 3.0-liter diesels, and a buyback program similar to what's in place for 2.0-liter vehicles would be rather costly.

If there's a time to save money, sadly, now's not that time. The industry as a whole is making a massive shift towards electrification, and with that comes the cost of retooling plants and investing in the technologies required of post-2020 mobility.

Having to spend tens of billions of dollars to deal with the past is not the most ideal expenditure, but Volkswagen appears determined to make it all work out. It's already announced the I.D. concept, a semi-autonomous electric vehicle that will become a proper production model by 2020. VW Group plans on releasing roughly 30 electric vehicles over the next few years.