Mar 8, 2016, 8:57am ET

VW warns of 'unprecedented' fines, possible job cuts

Company labor heads suggest the workforce may need to be trimmed if penalties soar, according to reports.

Volkswagen officials have reportedly warned workers that layoffs may be on the horizon if government agencies pursue steep fines for years of diesel emissions non-compliance.

Company works council chairman Bernd Osterloh issued the dire warning at a meeting attended by tens of thousands of German workers, according to Reuters.

The comments did not include any specific reference to levels of expected fines, leaving the matter surrounded in uncertainty, though Osterloh made clear the implications for a worst-case scenario. The messaging also appears to be aimed at government officials, as job impacts will undoubtedly be considered by regulators tasked with deciding punishments.

"Should the future viability of Volkswagen be endangered by an unprecedented financial penalty, this will have dramatic social consequences," he said. "We very much hope that the U.S. authorities also have an eye for this social and employment-political dimension."

Elon Musk and a list of other clean-energy executives last year called on the government to consider alternative settlements rather than focusing on steep fines and forcing the company to fix offending vehicles. The group argued that VW should be presented with an opportunity to accelerate rollout of zero-emissions vehicles, potentially with an agreement to build EVs in the US.

"In contrast to the punishments and recalls being considered, this proposal would be a real win for California emissions, a big win for California jobs, and a historic action to help derail climate change," Musk said.

A recent report suggests the Environmental Protection Agency may have included the proposal in its settlement talks with VW. The claim has not been independently corroborated, however, and it is not unusual for provisions to be presented in negotiations but ultimately rejected.

Unofficial estimates of potential fines vary wildly, ranging from $18 billion to more than $40 billion. The company could also be forced to compensate owners or buy back vehicles that cannot be brought into compliance.