The German state of Bavaria plans to sue Volkswagen over the carmaker's engine rigging scandal that led to massive losses in the southern region's pension funds, its finance ministry said Tuesday.

Bavaria will seek "a maximum of 700,000 euros" ($784,000) in damages, a spokeswoman for the state's finance ministry told AFP, confirming a report by national news agency DPA.

Volkswagen is struggling to get past its biggest crisis, which erupted last September after it was forced to admit that it had installed sophisticated software into 11 million engines with the express purpose of duping emissions tests.

The shock revelation led to a 40-percent plunge in the company's share price last autumn, wiping out some 25 billion euros in market capitalisation in two days.

Bavaria's civil servant pension funds were likewise hit by the market storm as they held around 58,000 VW shares.

"Because VW breached its notification obligations, it must repay the difference in stock price to Bavaria's pension funds. We want that money back from VW," Bavaria's finance minister Markus Soeder told DPA.

VW is facing a myriad of lawsuits and regulatory fines over the engine rigging scam, including one filed by shareholders accusing it of holding back information about emissions cheating at the automobile giant.

While it had already set aside 18.4 billion euros in provisions to meet costs of the scandal, the final bill arising from the crisis remains incalculable.

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