BERLIN (Reuters) -Volkswagen, under pressure from high costs and Chinese competition, rejected union proposals for cost savings on Friday, just days ahead of planned walkouts meant to avoid unprecedented plant closures.

“Although there may also be positive effects in the short term, the measures will not lead to any sustainable financial relief for the company in the coming years,” the company said in a statement, adding it would remain in contact with labour representatives.

Germany’s powerful IG Metall union this month proposed 1.5 billion euros ($1.6 billion) in cost savings, including forgoing bonuses for 2025 and 2026.

“Sustainable savings of 1.5 billion euros cannot be ascertained even after intensive analysis,” the company said on Friday.

A Volkswagen source dismissed the union’s proposals, saying they were intended to buy time the company does not have.

“New discussions in an even more difficult environment would be necessary by 2026 at the latest,” the source said, adding that some of the proposals were not legally feasible.

Volkswagen has demanded a 10% wage cut, arguing it needs to slash costs and boost profit to defend market share in the face of cheap competition from China and a drop in European car demand. It is also threatening to close plants in Germany for the first time in its 87-year history.

UNION RESPONSE

The union reiterated its cost-cutting proposals in response to the Volkswagen statement.

“IG Metall has taken a huge step towards Volkswagen’s management in the negotiations”, it said, adding the company had failed to provide an answer as to what steps it is prepared to take towards its employees.

A complex organizational structure, misjudged investments, poor management decisions, weak demand in Europe and China, high costs, and Germany’s bureaucracy have all been blamed for Volkswagen’s problems in its home market.

Executives have said they do not expect the demand for cars in Europe seen before the pandemic to return, leaving the company with excess and expensive production capacity.

IG Metall earlier on Friday said Volkswagen workers could go out on strike across Germany as soon as next week, escalating the clash with management.

“Strikes are possible and also necessary from the beginning of December,” IG Metall said in a handout to workers seen by Reuters, adding an agreement not to stage walkouts will end on Saturday.

So-called warning strikes at the carmaker’s plants across Germany are expected to take place as soon as Monday, according to people familiar with the matter, which would mark the first large-scale walkouts at Volkswagen’s domestic operations since 2018.

Warning strikes usually last from a few hours up to a day.

Labour representatives and management will meet again on Dec. 9 to carry on negotiations over a new labour agreement for workers at the German business – VW AG – with unions vowing to resist any proposals that do not provide a long-term plan for every VW plant.

The strikes, which could escalate into 24-hour or unlimited strikes if a deal is not struck in the next round of wage negotiations, will put a dent in Volkswagen’s output at a time when the carmaker is already facing declining deliveries and plunging profits.

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(Reporting by Friederike Heine, Victoria Waldersee, Christina Amann and Christoph Steitz, additional reporting by Thomas Seythal, editing by Rachel More, Susan Fenton, Miranda Murray and David Evans)

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