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Big fine will result in big job cuts warns VW’s labor Chief

In what could be described as game of chess, VW’s labor chief has warned U.S. authorities that imposing big fines on the company will result in big job cuts which is likely to hurt the U.S. economy.

With the U.S. Justice Department suing Volkswagen for upto $46 billion for breaching U.S. environmental laws Volkswagen has warned that although the fine may pinch it in financial terms it will mean that it will have to cut jobs in the United States, Europe and in other countries. This is the message Volkswagen top labor official has told 20,000 workers in its German headquarters, yesterday.
Volkswagen has yet to find a fix for the nearly diesel 600,000 cars that are affected by its diesel emission cheating scandal.
What is clear however is that Volkswagen will be cutting jobs to meet the cost of ‘Dieselgate’ which depends “decisively” on the quantum of the fines, said Bernd Osterloh, Volkswagen’s work councils chairman to workers yerterday at a meeting attended by the company’s top managers.
"Should the future viability of Volkswagen be endangered by an unprecedented financial penalty, this will have dramatic social consequences," said Osterloh.
In what can be considered a tactical move, Osterloh has notified U.S. authorities that the quantum of its penalty in the U.S. will result in job cuts.
He went on to add, "We very much hope that the U.S. authorities also have an eye for this social and employment-political dimension".
Volkswagen totally employs 600,000 people at 120 factories worldwide of which 270,000 people are employed in Germany and 2,200 in its U.S. plant in Chattanooga, Tennessee.
Speaking at this meeting was also Volkswagen’s CEO, Matthias Mueller who said the scandal will have a "substantial and painful" impact on the company’s finances without elaborating any further.
Last year, Volkswagen has created a provision of 6.7 billion euros ($7.39 billion) in its balance sheet for the cost of recalling 11 million diesel vehicles globally. Furthermore it has deferred the release of its 2015 results to April 28 to better assess the financial implications emanating from the ‘Dieselgate’ crisis.
"The software manipulations and its consequences will keep us busy for a long time," said Mueller who went on to add that it could take years to fully assess the financial impact of the scandal.
Volkswagen’s second largest shareholder, the state of Lower Saxony, expects more "unpleasant news" to flow out in the coming months. However, it is confident that the company has the financial strength and the nerves to cope with issues emerging from this unpleasant episode.
"We will this year probably every now and then be confronted with unpleasant news related to 'Dieselgate'," said Stephan Weil, prime minister of Lower Saxony, at 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."
Significantly, Lower Saxony, which holds a 20% stake in Volkswagen, has "no reason" to alter its commitment in the company despite ‘Diselgate’, said Weil, a member of Chancellor Angela Merkel's Social Democrat (SPD) coalition partners.
Investigators Net more suspects
In related news, German investigators have widened their net and are now looking at 11 more suspect employees, up from 6.
As per Klaus Ziehe, who works at the state prosecutor’s office in Braunschweig, Lower Saxony, which is leading the German case against Volkswagen, said a total of 17 people are now being investigated.
"The number of suspects has risen, although none are from the management board," said Ziehe.

Debashish Mukherjee

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