Volkswagen will suspend production at its small showcase factory in the German city of Dresden next year as the carmaker alters its model strategy to cut costs in the wake of the emissions test scandal.

VW said in October it would discontinue production of the Phaeton sedan, which is built at the glass-walled plant in the eastern state of Saxony. The model -- a pet project of former Chairman Ferdinand Piech which cost more than 1 billion euros ($1.1 billion) to develop -- has never met sales targets since coming to market in 2002.

Production of the Phaeton, assembled by 300 of the Dresden plant's 500 workers, will end in late March. The site, the smallest of VW's 10 German factories, will then be reconfigured for about a year to prepare for producing an all-electric Phaeton by about 2019.

"Production in Dresden will be suspended during the restructuring phase," Jens Rothe, head of the works council of VW's operations in Saxony, said on Wednesday, adding that the plant would be awarded a new product for when it reopens, ensuring "employment will in future be secured on today's level".

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Flagship Down? Volkswagen Suspends Phaeton Production To Cut Costs

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