"In a worst-case scenario, Volkswagen could face close to $50 billion in damage" resulting from EPA fines and investor lawsuits, said Ferdinand Dudenhoeffer, director of the Center for Automotive Research at the University of Duisburg-Essen, a German think tank.
"In addition," he said, "the VW brand can forget about selling cars in the U.S. market for the next five years."
VW may be forced to accelerate a cost-cutting program to offset billions it expects to lose, supervisory board member Bernd Osterloh wrote in a letter to employees.
The scandal could cost the group its industry leadership in the global sales race after it took the top spot from Toyota in the first half of the year. Analysts are calling on the company to focus on its core business, scrap prestige projects such as the next Bugatti supercar and VW Phaeton sedan and even abandon the U.S.
"An Armageddon scenario -- purely for illustrative purposes -- where we knock out VW's U.S. business, would take more than 20 percent of earnings away," wrote Bernstein analyst Max Warburton in a note to investors.
Warburton recommends VW abandon all efforts to sell diesels in the U.S. -- a "heart-wrenching decision" since the whole U.S. strategy was founded on diesel.
Others are calling on the brand to bow out of the U.S. entirely.
"The crisis lays bare the need to rethink whether the company really has to own noncore businesses like Bugatti and [motorcycle brand] Ducati, and most importantly whether the VW brand would be better advised exiting the U.S. market where it's lost billions," said NordLB auto analyst Frank Schwope.
In Europe, where VW is the market leader and where diesels are much more popular, VW diesels are likely to see their resale values drop. Analysts say some owners could defect to Ford and Opel, which next month will launch its next-generation Astra.
In his letter to employees, Osterloh, VW's senior labor leader and a key boardroom director in charge of oversight, called on management to support a new climate in which subordinates no longer hide problems from their superiors out of fear.