VW workers are angry at plans for a two year pay freeze

VW said pre-tax profits for the first nine months of 2004 fell 44% to 765m euros ($971m; �532m).

The firm began a fifth round of talks with unions about pay and labour costs on Thursday.

VW wants to achieve a 30% reduction in labour costs by 2011 and has warned that 30,000 jobs may be at risk.

One German newspaper claimed the two sides could soon reach a settlement.

Strike threat

The IG Metall union, which is seeking guarantees on job security and above inflation pay rises, has threatened a series of warning strikes if no deal is done on Thursday.

We must get an agreement that does not take money out of people's pockets but still cuts labour costs Peter Hartz, VW

In an interview with the Braunschweiger Zeitung newspaper, a senior VW executive said the company would present new proposals on job security for workers at its six plants in western Germany.

"We will present an employment atlas for each factory that makes clear which level of employment and which products are planned," personnel director Peter Hartz told the paper.

"We must get an agreement that does not take money out of people's pockets but still cuts labour costs."

Die Welt newspaper said management and unions wanted to agree a deal before a meeting of VW's supervisory board on 12 November.

Any likely deal would include a 1.5% pay rise and production guarantees for individual plants, the paper said.

Job guarantees

Unions have demanded blanket guarantees on future employment and pay increases of between 2.2% and 2.7%, both of which VW have rejected.

VW's profits have been slipping for more than two years

More than 30,000 VW workers staged demonstrations outside VW plants in Wolfsburg and Salzgitter on Wednesday in protest at the auto giant's plans to introduce a two year pay freeze.

VW, whose profitability has been eroded by intense competition, a strong euro and comparatively high labour costs, has warned that 30,000 jobs may be in danger if costs are not reduced.

Difficult conditions

Trading figures published before the resumption of negotiations further highlighted VW's difficulties.

The figures showed profit in the third quarter dropped 65% to 126m euros.

But there was better news in terms of sales.

Sales for the nine months increased 5% to 67bn euros while the number of cars delivered over the period rose 1% to 3.7 million.

In a statement, VW said trading had been affected by "difficult economic conditions".

The Volkswagen Group makes cars under the VW, Audi, Skoda, Seat and Bentley labels, and a few other smaller brands.

VW's problems are reflected across the car industry where a number of manufacturers are considering major cost-cutting programmes.