Volkswagen Group has said it is scrapping labour agreements in Germany in a move that could pave the way for job cuts at six plants in Germany.

Multiple media reports in Germany say the company has given notice to the IG Metall union of the cancellation of a range of labour agreements including one that guarantees jobs at six German plants until 2029.

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Last week VW warned that it could no longer rule out plant closures or layoffs in Germany as it intensifies cost-cutting measures aimed at its survival amid a host of major challenges, including the transition to electric vehicles and rising competition from Chinese OEMs.

Reports in Germany suggest the company wants to go further with cost cuts in relatively high-cost Germany. Representatives of the IG Metall labour union have said they will fight to preserve all sites and protect jobs.

“We must enable Volkswagen AG to reduce costs in Germany to a competitive level in order to invest in new technologies and new products with our own resources,” the company’s Labour Director Gunnar Kilian said in a statement, according to Reuters.

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Justin Cox, analyst at GlobalData told Just Auto: “This latest news suggests that capacity utilisation levels at some relatively high-cost plants in Germany are running at levels that make turning a profit difficult, even in current market conditions.

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“That is bound to be a very big worry in the face of the potential Chinese competitive challenge in electric vehicles, as well as the energy transition – and higher costs versus incumbent ICE tech – impacting the whole sector.

“In effect, VW is having to deal with significant headwinds on cost efficiency, at the same time as we can see others – notably the Chinese – gaining a competitive advantage through lower unit costs, higher volumes and significant supply chain advantages in key emerging tech areas such as batteries.”