Cost-cutting VW bets big to revamp loss-making luxury Phaeton

With Volkswagen (VOWG_p.DE) having embarked on a big cost-cutting drive, industry experts are baffled why the "people's car" maker plans to spend millions of euros upgrading a loss-making luxury saloon. The 76,000-euro (56,688 pounds) Phaeton, a pet project of Chairman Ferdinand Piech, has never met VW's original sales target of 20,000 cars annually. The plans appear all the more perplexing to analysts as VW has pledged to make annual cost savings of 5 billion euros at its passenger-car brand by 2017, as the world's second-biggest carmaker by sales seeks to narrow the gap with global leader Toyota . His comments echoed VW's plans to reduce the number of costly parts and drop some non-profitable variants from the German group's 310-model line-up as Europe's largest automaker shoulders costs of future growth and investments in lower-emissions technology.

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