Former BMW executive Herbert Diess took over as Volkswagen brand boss on July 1st.

Volkswagen plans a complete makeover of its diesel technology in the wake of reports it cheated on emissions tests. The new versions of its high-mileage engines should go into production “as soon as possible” according to VW brand chief Herbert Diess.

The maker’s current 2.0-liter diesel was surreptitiously programmed to produce low levels of smog-causing NOx during emissions tests, but in a trade-off apparently meant to improve performance and mileage, those TDI engines were allowed to produce significantly higher levels of pollutants in real-world use. VW has confirmed it used the so-called “defeat device” technology in 11 million vehicles sold worldwide over the past seven years, including 482,000 purchased in the U.S.

Even as VW moves ahead on developing a new version of its small EA 189 diesel engine, the maker will cut about $1.1 billion in annual investment spending, Diess confirmed. VW has so far set aside $7.3 billion to cover the cost of the scandal, but many analysts believe that figure is far too low.

VW is one of the world’s largest producers of diesel engines. They account for about half the maker’s sales in Europe and a quarter of its volume in the U.S. But meeting increasingly stringent emissions challenges posed by U.S. and European regulators has been a challenge.

VW, at one point, was prepared to license the BlueTec diesel technology developed by rival Daimler AG, but reversed course, coming up with its own TDI, or turbo direct-injection, system. It was launched seven years ago and appeared to offer the seemingly impossible combination of good performance, great mileage and extremely low emissions.

(Just following orders? Click Here to see how the VW scandal came together.)

What was equally striking, industry analysts noted, was that the 2.0-liter EA 189 engine could do that without the use of urea, an ammonia-like additive used to break down oxides of nitrogen into harmless components.

Ultimately, it has turned out, the engines couldn’t meet all three targets and required the use of hidden software that could detect when one of the vehicles was undergoing emissions tests, temporarily reducing power to improve the performance of its pollution control system.

VW plans to begin a retrofit of the EA 189 diesel starting in January – though repairs in the U.S. may take longer to launch because they might require the addition of new hardware, as well as updated software.

(VW says it will fix diesel emissions problem. Click Here for more on its plan.)

How much different the new diesel engines will be is unclear, but according to Diess, VW is developing a system that would hold down emissions – while maintaining power and mileage – through the use of a urea and water injection system. Such technology is expected to be more expensive than that used on the current EA 189 diesel.

VW’s decision to trim its investment is not entirely unexpected. Even before the emissions test scandal broke, the maker was looking for ways to cut costs and boost profitability. But it is facing potentially enormous costs in the wake of its cheating. The U.S. EPA alone could levy up to $18 billion in fines. There are potential criminal investigations underway in the U.S. and Germany, and a number of class action lawsuits have been filed.

Meanwhile, the scandal could soon land on the silver screen, superstar Leonardo DiCaprio and Paramount Pictures buying the rights to a new book set to examine the genesis of the Volkswagen affair.

(For more on the movie plans, Click Here.)