An deal to save around €80 million ($US96 million) a year will allow Volkswagen to build a new model at its plant in Emden starting in 2008, the carmaker reportedly said on Wednesday.

The accord with the works council and the IG Metall labour union modifies an existing in-house wage agreement and calls for spreading the 28.8-hour work week over five days rather than four to save money on breaks and shift differentials, VW told Reuters.

The report noted the deal follows an agreement last month that will let VW build a new compact sport utility vehicle (SUV) at its main German plant in Wolfsburg - retaining 1,000 jobs - in return for labour concessions that will save it €850 per vehicle.

New VW brand chief Wolfgang Bernhard reportedly said in a statement: "Our German plants must be able to produce at prices that allow exports. The agreement for Emden marks another important step to strengthen our competitiveness."

Reuters said the upper mid-class model to be assembled in Emden will be in addition to the 200,000 Passat sedans and estate cars the plant builds now.

IG Metall reportedly said the model had the project name VW CC-Coupe [it's being referred to in the press as the 'Eos' coupe] and would ensure up to 1,000 jobs at the plant that now employs 9,600 staff.

The union said production will take place under the in-house wage accord but Reuters noted the new SUV in Wolfsburg will be built by a separate VW unit that uses lower-cost workers not covered by the in-house agreement for 100,000 VW brand staff.