Karmann will cut 1,300 jobs because of a lack of clients, the IG Metall trade union has said.
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The essential reason is the stoppage of the car assembly unit of the company, the union said in a statement.
Karmann used to do contract assembly work for Renault, Volkswagen and Mercedes, which have all been hit by the crisis.
The State of Lower Saxony has promised financial support to workers threatened with redundancy at the firm.
According to German media, the state wants to set up a company for the workers of the Osnabruck company, using money from the EU globalisation fund. It has already started negotiations with the German government and the European Commission.
Karmann is closing its contract vehicle assembly business and shifting to vehicle development and cabrio roof systems.
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