Volkswagen will form long-term strategic partnerships with its parts suppliers and has agreed cost cuts on purchases worth hundreds of millions of euros, according to a Reuters report.

Separately, its German labour representatives reportedly agreed tentatively to a new labour shift model they said could save VW another €50 million ($US60.3 million) in costs every year.

Reuters noted that the move to form strategic partnerships underlines a trend towards creating stronger ties with a smaller, select group of parts suppliers that has proven beneficial to companies like Toyota and BMW.

“The successful suppliers will become premium partners that we will take into increased consideration in the future during meetings for new model projects,” group purchasing boss Francisco Javier Garcia Sanz said in a statement cited by the news agency.

VW reportedly said it would take the cost-savings measures immediately rather than wait until a model’s life cycle ends.

“The triple-digit-million euros in cost savings that have been identified will be achieved starting next year and will be sustainable,” a spokeswoman for Volkswagen told Reuters.

Reuters noted that chief Executive Bernd Pischetsrieder had already set a target of achieving €1 billion ($US1.2 billion) in material cost savings alone in 2006 and was told by the spokeswoman: “The measures are one element of the target to cut material costs by €1 billion next year.”

Separately, Volkswagen has reached a tentative agreement with its works council over a new labour shift model for Golf and Golf Plus production at its main Wolfsburg plant that could save it millions every year in labour costs, Reuters said.

“Volkswagen is confident it can sign a deal soon,” a company spokeswoman told the news agency, declining to provide details of cost savings until VW’s works council votes on the agreement by November.

A spokeswoman for the works council reportedly said later the new shift model would bring savings of €50 million per year.

In exchange, the works council spokeswoman said the company would maintain production of its flagship Golf and its Golf Plus derivative in Wolfsburg at 400,000 units in 2006 – guaranteeing the jobs of 5,300 employees.

Reuters noted that VW initially planned to cut production there to 300,000 cars and shift the remaining 100,000 units to lower-wage plants such as Mosel in eastern Germany or Brussels in Belgium.

The new shift model that would take effect on January 2 moves away from rotating three shift operations so wmployees now would either remain on the night shift or rotate between morning and late shifts every week. The model would have staff working Monday to Thursday inclusive for 7.2 hours daily.