Volkswagen will switch to new diesel emissions technology in Europe and North America as well as cut a €1bn annual investment spending.
VW brand head Herbert Diess made the announcement as the company struggles to overcome a scandal over cars equipped with computer software that let them evade US emissions tests.
Mr Diess said the company would change its diesel technology in Europe and North America and install technology that uses a solution called AdBlue to reduce diesel emissions.
He said that change would come “as soon as possible”.
He also said the company would extend its low-cost manufacturing techniques and reduce spending on investments.
The company also plans to turn the next version of its large Phaeton luxury saloon into an electric-only vehicle to demonstrate the company's technological competence.
Volkswagen AG, which has other brands including Audi and Skoda, is facing a crisis after US authorities said it evaded emissions checks on 482,000 vehicles.
The company has set aside 6.5 billion euro to cover the costs of recalls and fines. But analysts say the costs in terms of fines and lost sales will likely be considerably higher.
Earlier, the governor of Germany’s Lower Saxony state – which holds a minority stake in Volkswagen, said the car maker should have admitted earlier that it manipulated emissions data in diesel vehicles.
VW acknowledged the deception to US regulators on September 3, more than a year after researchers published a study showing the real-world emissions of two VW models were far higher than allowed.
Governor Stephan Weil told Lower Saxony’s state legislature that “this confession should clearly have come a great deal earlier – another serious mistake”, news agency dpa reported.
Lower Saxony holds a 20% stake and Mr Weil sits on Volkswagen’s board of directors.
He has said that the state’s representatives were “completely surprised” by the emissions scandal and vowed to work to protect jobs.