WOLFSBURG, Germany – Volkswagen to be sued by German insurer Allianz over the severe drop in its shares as a result of the carmaker’s diesel emissions scandal, a source familiar with the situation stated. If successful, the lawsuit would add to financial pressures on Volkswagen that its chief executive said on Tuesday would be “substantial and painful”.

At the same time, the company’s labor leader notified that the extent of probable job cuts at VW would decisively be influenced by the level of U.S. 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 said to 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 last September. Allianz Global Investors holds 0.06 percent of VW preference shares and just 10,000 ordinary shares, so will have lost some 8.6 million euros ($9.5 million) on its stake; moreover the Allianz lawsuit would happen “within this month.” Allianz said in a statement it had not yet filed an action against VW however was weighing a suit.

The action will add to VW’s litigation risks in Germany, where the carmaker already faces dozens of private lawsuits.But it is dwarfed by the possible costs in the United States, where the Justice Department has sued VW for up to $46 billion for breaching U.S. environmental laws. More than 500 lawsuits have been filed against the company in the United States, and there is still no fix for nearly 600,000 cars affected there.

U.S. authorities were called by Osterloh, who also sits on VW’s 20-member supervisory board, to consider the risk of possible job cuts in deciding on penalties. “We very much hope that the U.S. authorities also have an eye for this social and employment-political dimension,” he said. Europe’s largest automaker employs over 600,000 people at around 120 factories worldwide, including 270,000 in Germany. Its U.S. plant in Chattanooga, Tennessee employs about 2,200 people.

At the Wolfsburg meeting, Chief Executive Matthias Mueller said while speaking that the scandal would impose “substantial and painful” financial harm on the carmaker. Volkswagen last year set aside 6.7 billion euros ($7.39 billion) to cover the expected costs of recalling about 11 million diesel vehicles globally. It has postponed the release of its 2015 results by more than a month until April 28 to better assess the financial implications of the crisis.

Paris prosecutor’s office said on Tuesday, “Outside the United States, France has unlocked a formal investigation into suspected “aggravated fraud” by VW.”The software manipulations and its consequences will keep us busy for a long time,” Mueller said, adding that it would take years to determine the full extent of the financial impact.
The state of Lower Saxony, VW’s second-largest shareholder, expects more “unpleasant news” to emerge over the months ahead but remains confident that the company has the financial strength to cope.

“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.

Holding 20% of VW’s common shares, the Western German state, has “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.

Separately, German prosecutors said on Tuesday they have widened their investigation into the emissions scandal and are now targeting 11 more employees. Klaus Ziehe from the state prosecutor’s office in Braunschweig, Lower Saxony, which is leading the German case against VW, said 17 people were now being investigated, up from six previously. “The number of suspects has risen, although none are from the management board,” Ziehe said.