VW may offer discounts to owners of cars with illicit software -DPA says

FRANKFURT/BERLIN (Reuters) - Volkswagen may offer VW owners in Germany discounts on new cars if they turn in certain old models affected by the emissions scandal that has rocked Europe's biggest carmaker, German news agency DPA reported on Sunday.

Volkswagen is battling the biggest business crisis in its 78-year history after admitting last month it installed software in diesel vehicles to deceive U.S. regulators about the true level of their toxic emissions.

The group now expects the costs of the scandal, which include a recall of 8.5 million vehicles in Europe, to exceed 30 billion euros ($33 bln), German monthly Manager Magazin reported on Saturday.

It is seeking ways to cut costs and stabilise sales to cope with the fallout of the scandal. Incentives for VW owners to buy new vehicles could help buoy sales figures and take pressure off VW dealerships to implement fixes quickly.

The special offers may focus on the owners of vehicles with 1.6-litre diesel engines, which require costly hardware upgrades rather than just software fixes, sources at Volkswagen and VW dealerships said, according to DPA.

The offer would be available only in Germany, where around 2.4 million cars with the cheating software were sold.

Volkswagen said in response that it was common for Volkswagen and its dealers to consider special offers for existing customers, declining to comment further.

The emissions scandal has wiped more than a quarter off VW's stock market value, forced out its long-time chief executive and sparked investigations and lawsuits across the world.

Volkswagen has said it will cut investment plans at its VW division -- the largest by revenue -- and speed up cost cutting to cope with the cost of cleaning up the emissions scandal.

Manager Magazin said VW wanted to freeze managerial promotions next year at its VW division and planned to re-use as many parts as possible in the next generation of its popular Golf model to save hundreds of millions of euros.

The group has also suspended more than 10 senior managers, including several top engineers, as part of an internal investigation.

Two people close to the matter told Reuters that Volkswagen has now also suspended Hanno Jelden, the head of powertrain electronics, a 22-year VW veteran with expertise in engine and transmission electronics as well as hard- and software control systems.

German weekly Bild am Sonntag reported Jelden was also under investigation by German prosecutors on suspicion of fraud. Volkswagen declined to comment on the matter, and Jelden did not respond to emails seeking comment.

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(Reporting by Maria Sheahan and Andreas Cremer; Editing by Larry King and Susan Fenton)