German insurer Allianz plans to sue Volkswagen AG (VW) over the sharp drop in its shares as a result of the automaker’s diesel emissions scandal, a source familiar with the situation said.
If successful, the lawsuit would add to financial pressures on Volkswagen that its chief executive on Tuesday said would be “substantial and painful.”
At the same time, VW’s labor leader said that the extent of possible job cuts at VW would depend “decisively” on the level of US fines for its cheating of emissions tests.
“Should the future viability of Volkswagen be endangered by an unprecedented financial penalty, this will have dramatic social consequences,” works council chairman Bernd Osterloh told more than 20,000 workers at company headquarters in Wolfsburg.
The “Dieselgate” scandal has forced out the previous chief executive, tarnished one of Germany’s most renowned corporate brands and driven down VW’s share price by 31 percent since it emerged in September last year.
According to Thomson Reuters data, Allianz Global Investors holds 0.06 percent of VW preference shares and just 10,000 ordinary shares, so will have lost about 8.6 million euros (US$9.5 million) on its stake.
While the source said the Allianz lawsuit would happen “within this month,” Allianz said in a statement that it had not yet filed an action against VW, but was weighing a suit.
The action will add to VW’s litigation risks in Germany, where the carmaker already faces dozens of private lawsuits.
However, it is dwarfed by the potential costs in the US, where the US Department of Justice has sued VW for up to US$46 billion for breaching US environmental laws.
More than 500 lawsuits have been filed against the company in the US, and there is still no fix for nearly 600,000 cars affected there.
Osterloh, who also sits on VW’s 20-member supervisory board, called on the US authorities to consider the risk of possible job cuts in deciding on penalties.
“We very much hope that the US authorities also have an eye for this social and employment-political dimension,” he said.
Europe’s largest automaker employs more than 600,000 people at about 120 factories worldwide, including 270,000 in Germany. Its US plant in Chattanooga, Tennessee, employs about 2,200 people.
Speaking at the Wolfsburg meeting, VW chief executive Matthias Mueller said the scandal would inflict “substantial and painful” financial damage on the automaker, without elaborating.
Volkswagen last year set aside 6.7 billion euros (US$7.39 billion) to cover the expected costs of recalling about 11 million diesel vehicles globally. It has postponed the release of last year’s results by more than a month until April 28 to better assess the financial implications of the crisis.
France has opened a formal investigation into suspected “aggravated fraud” by VW, the Paris prosecutor’s office said on Tuesday.
German prosecutors also said on Tuesday that they have widened their investigation into the emissions scandal and are now targeting 11 more employees.
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