DaimlerChrysler's luxury unit Mercedes reportedly is resuming talks on Tuesday with employee representatives to try to hammer out a deal aimed at cutting annual labour costs by €500 million euros ($US622.4 million).

Reuters noted that the dispute saw over 60,000 Mercedes workers down tools last Thursday in a nationwide protest over the company's plans for fewer paid breaks and other benefits at its plants in the wealthy south-western state Baden-Wuerttemberg.

The company's works council reportedly said the talks would resume at the group's headquarters in Stuttgart.

"There are still controversial issues where there's a big difference of opinion," a works council spokeswoman told Reuters, declining to comment on whether a deal was possible on Tuesday.

The news agency noted that the Mercedes Car Group, the largest contributor to operating profits at DaimlerChrysler, wants to reduce labour costs in Germany by asking employees at its largest plant in Sindelfingen essentially to work longer hours without compensation.

The attempt has touched a raw nerve among German manufacturing employees who have seen thousands of jobs move to cheaper locations in less developed economies in recent years, Reuters added.

Parts maker Robert Bosch reportedly won agreement from workers at a plant near Lyon to work 36 hours instead of 35 without extra pay, making them the first employees to vote to scrap France's 35-hour week.

According to Reuters, DaimlerChrysler's works council plans to hold more demonstrations at Daimler plants throughout Germany this Friday should no resolution be reached by Thursday.

In an interview with German television on Monday night, Mercedes chief Juergen Hubbert reportedly said he thought an agreement was possible when talks resumed on Tuesday.

Reuters said Hubbert has threatened to cut 6,000 jobs at Sindelfingen and shift production of the redesigned next generation Mercedes C-class mid-sized saloon, due for launch in 2007, from the works to more efficient factories in Bremen and South Africa [where all right hand drive versions of the current model sedan are already made].

The report said he angered employees by branding as a "disease" wage agreements valid in Daimler's home state of Baden-Wuerttemberg that grant paid pauses for every hour worked and a 20-30% additional bonus for workers starting their shifts at midday.

According to Reuters, DaimlerChrysler's management board over the weekend appeared to offer an olive branch by suggesting it would be ready to take a pay cut if the cost-cutting deal were struck.

A company spokesman declined to comment to the news agency on reports that the pay cut could amount to 10% and include lower tiers of management.

Government welcomes DaimlerChrysler offer to cut board member pay in working hours dispute