Europe’s largest carmaker, Volkswagen, is to reduce investment in designing and building vehicles by 6% over the next two years as it struggles to lower its costs and boost profit. It will invest 11.8 billion euros in its car making division next year and in 2006. Just one year ago, VW cut its investment plan for the next five years by 11%.
The company’s new investment level will be less than 7% of sales which brings it closer to the industry average. In recent years VW has spend more than that as it designed and brought to market new models. Last week the carmaker and the IG Metall trade union agreed a pay freeze in an effort to cut costs by two billion euros by 2011. In return, Volkswagen promised not to cut jobs until then. The company reported a seventh consecutive decline in quarterly profit last month.