Volkswagen says it has considerable overcapacity in its workforce

On Monday, Volkswagen said it had "several thousand" surplus employees, particularly at its Wolfsburg plant.

The company is hoping that early retirement and redundancy offers will thin out its excess staff and said it would avoid compulsory redundancies.

The world's fourth largest carmaker employs 125,000 workers in Europe.

Roughly 10,000 of the staff cuts will take place in Germany itself, according to German media reports.

Wage freeze

VW also aims to intensify job cuts outside of production, the company said, though definitive figures have not yet been decided upon.

Meanwhile, it has pledged to honour agreements with trade unions that protect German workers from compulsory layoffs until the end of 2011 in return for a wage freeze.

Shares in VW have already risen by 30% this year, but analysts have warned that the company needs a bold stroke on cost cuts this year to keep its share price rising.

One analyst, David Arnold at Commerzbank, is reviewing his stock rating on VW after its "amazing run" and is now questioning how much upside it has left.

"I think it is pretty fairly valued at the moment," he said.