Daily Management Review

US Fines would Result in Loss of Jobs at Volkswagen Business in US, Europe: Company Labor Chief


In a meeting with 20,000 workers at its German headquarters on Tuesday,  the top labor official of Volkswagen said that depending on how big a fine has to be paid for its manipulation of diesel emissions tests, the car maker may have to cut jobs in the United States as well as Europe and other countries. 

While there is still no fix for nearly 600,000 cars affected in the United States almost six months after the scandal broke, the U.S. Justice Department has sued Volkswagen for up to $46 billion for breaching U.S. environmental laws. 

VW's works councils chairman Bernd Osterloh said on Tuesday at the meeting of workers in Wolfsburg which was also attended by the carmaker's top managers that the extent to which VW may be forced to cut jobs to help meet the costs of 'Dieselgate' depends "decisively" on the level of fines. 

"Should the future viability of Volkswagen be endangered by an unprecedented financial penalty, this will have dramatic social consequences," said Osterloh, who also sits on VW's 20-member supervisory board.

Osterloh called on the U.S. authorities to consider the risk of possible job cuts in deciding on penalties while speaking to workers at VW's flagship plant about the emissions crisis and structural changes. 

"We very much hope that the U.S. authorities also have an eye for this social and employment-political dimension," he said.

Over 600,000 people at around 120 factories worldwide, including 270,000 in Germany is employed by Europe's largest automaker. There are about 2,200 people at the company‚Äôs U.S. plant in Chattanooga, Tennnessee. 

The scandal would inflict "substantial and painful" financial damage on the carmaker said Chief Executive Matthias Mueller while speaking at the Wolfsburg meeting. He however did not elaborate the issue further. 

In order to cover the expected costs of recalling of about 11 million diesel vehicles globally, Volkswagen last year set aside 6.7 billion euros ($7.39 billion). To better assess the financial implications of the crisis, the company has also postponed the release of its 2015 results by more than a month until April 28. 

"The software manipulations and its consequences will keep us busy for a long time," Mueller said on Tuesday. He added that it would take years to determine the full extent of the financial impact of the scandal.

While being confident that the company has the financial strength to cope, the state of Lower Saxony, VW's second-largest shareholder, expects more "unpleasant news" to emerge over the months ahead. 

"We will this year probably every now and then be confronted with unpleasant news related to 'Dieselgate'," Stephan Weil, prime minister of Lower Saxony, told the Wolfsburg meeting.

"The damage will, on balance, not be minor, that much can already be said today, but Volkswagen luckily has a strong economic base," Weil, also a member of the supervisory board, said.

There is "no reason" to alter its commitment to the carmaker despite the crisis, said Weil, a member of Chancellor Angela Merkel's Social Democrat (SPD) coalition partners. The Western German state holds 20 percent of VW's common shares. 

The investigation into Volkswagen's diesel emissions scandal has been widened by German prosecutors and is now targeting 11 more employees.

17 people were now being investigated, up from six previously, said Klaus Ziehe from the state prosecutor's office in Braunschweig, Lower Saxony, which is leading the German case against VW. 
"The number of suspects has risen, although none are from the management board," Ziehe said.