As the Volkswagen emissions scandal continues to rumble on, it could be set to claim another scalp: Bugatti. Braced to pay almost £5bn towards recalling and fixing millions of cars − and much more in fines and compensation − VW is planning to halt investment in non-core projects, including the iconic supercar brand.

These include a next-generation VW Phaeton, the brand's luxury saloon car, and a replacement for the Bugatti Veyron, which was expected to draw inspiration from the Vision Gran Turismo, shown off just days before the emissions crisis broke. New VW boss Matthias Muller told German media on 6 October that any projects that aren't "absolutely vital" will be cancelled.

Addressing workers at VW's headquarters in Wolfsburg, Muller said: "We will review all planned investments, and what isn't absolutely vital will be cancelled or delayed. I will be completely clear − this won't be painless."

A crisis about a loss of confidence in VW

The former head of Porsche went on: "In addition to the huge financial loss, this crisis is primarily a crisis about a loss of confidence. It affects the core of our company and our identity, our cars, and the essence of the brand: solidity, reliability and credibility."

It is understood that investment in mainstream VW models, like the Golf and Polo, will continue, but Autocar believes development of non-core vehicles, like the Phaeton and new Veyron replacement could be halted. Given Bugatti is a single-car company and the fact that the Veyron is no longer in production and the four-seater Galibier never made it to production there are doubts as to whether the brand will survive at all.

VW could put Bugatti up for sale, but any potential buyer − or VW, if it keeps it for when the scandal headache subsides − would be urged to proceed with caution. Bugatti was reported by The Economist to have lost an average of £3m on every one of the 450 Veyrons it sold. Clearly, no such project would get the green light in VW's current position of financial turmoil.

Muller said VW engineers are close to working out a solution to the defeat device installed in cars fitted with the EA189 diesel engine. The device could tell when the car's emissions were being tested and altered how the engine worked to produce lower emissions. On the open road some VWs were found to produce up to 40 times more nitrogen oxide (NOx) than is legal in the US.

VW says some cars will only require a software update, whereas others will need hardware modifications. The first recalls will take place in January and are due to be completed by the end of 2016. VW has set up a website to help owners find out if their car is affected and how to get it fixed.

Muller continued: "The technical solutions to the problems are in sight. By contrast, the business and financial consequences are not yet foreseeable."