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VW may cut jobs in response to ‘Dieselgate’ fines

As the Volkswagen diesel scandal continues without resolution, the German car maker’s financial outlook is worsening. VW currently faces multiple lawsuits from consumers and regulators in several countries, including a Justice Department suit and a class-action suit involving hundreds of owners in the U.S.

When news of the scandal first broke in September, Volkswagen said it would put aside $7.1 billion to deal with it. But now the company says it may have to cut jobs to soften the financial impact of settlements, fines, and the eventual recall of hundreds of thousands of diesel cars in the U.S.

The extent of possible job cuts will depend “decisively” on the amount of fines levied in the U.S., Bernd Osterloh, VW works council chairman, told 20,000 workers assembled at the company headquarters in Wolfsburg, Germany. Penalties severe enough to destabilize Volkswagen “will have dramatic social consequences,” Reuters reported him as saying.

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“We very much hope that the U.S. authorities also have an eye for this social and employment-political dimension,” Osterloh said. VW currently employs over 600,000 factory workers worldwide, including about 2,200 at a plant in Chattanooga, Tennessee. Speaking at the same meeting, Volkswagen CEO Matthias Mueller said the scandal would inflict a “substantial and painful” financial toll on the company.

In the U.S., VW currently faces a Justice Department lawsuit over alleged violations of the Clean Air Act related to the diesel scandal. The company could face up to $46 billion in penalties from that suit. It also has to deal with hundreds of lawsuits filed by owners of the non-compliant diesel cars, which were combined into a class-action suit that will be heard by a federal judge in California.

In addition to the legal costs, Volkswagen still has to start a recall for the roughly 600,000 affected diesel cars in the U.S. Last month Judge Charles R. Breyer, the U.S. District Court judge overseeing the class-action suit, gave VW until March 24 to figure something out. There’s no indication Volkswagen will meet that deadline, though, as none of its proposed fixes have been approved by regulators so far.