Workers are sticking to their demands for pay rises

The carmaker is calling for a two-year pay freeze, amid declining sales in its key markets - China, the US and Europe.

"If we end up nowhere... this would certainly be an extreme negative for the employment situation," VW finance chief Hans Dieter Poetsch told the Wall Street Journal

Job cuts on this scale would be unprecendented for a German car firm.

When asked how many jobs would be cut, Mr Poetsch told the newspaper "30,000 plus", an estimated one fifth of the company's workforce. He stressed that next week's talks mark a turning point.

German car companies have in the past found it difficult to cut jobs because of the country's stringent labour laws.

"The market has a strong degree of scepticism that they could carry out this threat," said Commerzbank analyst Adam Collins.

About one in seven jobs in Germany are related to the car industry. Employees at DaimlerChrysler and Siemens have been guaranteed job security in return for agreeing to wage freezes and a reduction of other benefits.

Theory and speculation

A spokesman for VW described the figure as "pure theory" and said it was based on a mathematical model.

Unions have demanded an annual 4% pay rise and say they will stick to that request at next week's negotiations.

Theoretical number games [are] absolutely out of order Klaus Volkert, VW works council

Harmut Meine, the chief union negotiator in the upcoming talks, accused VW management of "playing with people's fears about their jobs". Volkswagen's works council chairman Klaus Volkert said Mr Poetsch's comments were the "the snapshot of a single VW board member".

"Theoretical number games were absolutely out of order," he added.

A spokesman for Lower Saxony authorities, which holds nearly a fifth of VW voting rights and two seats on the supervisory board, said they would not intervene in the wage discussions which begin on 15 September.

Shares in Volkswagen at 1006 GMT on Thursday were little changed at 32 euros.