FRANKFURT -- Scandal-plagued Volkswagen Group has cut its global spending plan next year by more than $1 billion, but it spared the ax at its U.S. operations.
The biggest investment cut in North America affects only Mexico. Sources familiar with the plans say the renovation of a paint shop in VW's massive Puebla plant, one of the group's largest factories worldwide, will be shelved, even though the company says the decision is still under review.
The much-anticipated groupwide investment budget disappointed analysts, who had expected deeper cuts as VW braces for a multibillion-euro hit from its emissions cheating scandal.
Company officials were put on the defensive.
"Entire departments had precisely calculated their budgets, and it's simply impossible to put a stop to all of their projects," one insider said. "We can't just slash them, for example, by a third from one day to the next."
VW's spending next year in property, plants and equipment is expected to drop back to the 12 billion euro ($12.7 billion) level last seen in 2014 vs. the roughly 13 billion euro ($13.8 billion) estimated for this year, a cut of about 7 percent.
While the Puebla paint facility is about 20 years old, delaying its modernization can save Volkswagen $100 million or more. Paint shops tend to be among the most capital-intensive investments in car manufacturing and typically have to be run on a permanent three-shift basis to recoup their costs.
More investments could fall under the knife when the board meets with management early next year, VW's labor leader Bernd Osterloh warned staff on Friday, Nov. 20.
But sources say there are no indications any larger project is threatened in the U.S., where VW is investing $600 million in its Chattanooga plant to build a midsize SUV starting in late 2016.