BERLIN: The towns that became synonymous with Volkswagen AG’s rise to the pinnacle of the auto industry are feeling the pinch of the diesel-emissions scandal, freezing spending on projects such as playgrounds amid the carmaker’s abrupt fall from grace.
Wolfsburg, the northern German town founded in 1938 to build the “people’s car,” is halting 30 projects, including the new playgrounds, an ice rink and road work totaling 17 million euros ($19 million), in anticipation of lower tax revenue from the company employing half its 125,000 population. Nearby Braunschweig and the Bavarian town of Ingolstadt, home to VW’s Audi brand, have also reined in their budgets.
“Even if our town is free of debt and we were able to put provisions aside, we’re expecting a significant drop in commercial tax revenue,” said Wolfsburg Mayor Klaus Mohrs, who has also implemented a hiring freeze as he can assess the extent of the fallout. “We’re putting every project up for scrutiny.”
Communities across Germany, where the automaker has 271,000 employees, are bracing for the impact of the scandal on their budgets. Germany’s Institute for Economic Research estimates that VW’s commercial and corporate tax payments over the next two years will be 3 billion euros lower as a result of the diesel emissions cheating scandal. It’s especially acute for towns where VW has large numbers of employees because there’s also a concern that jobs may soon be on the line.
