A strike at the Volkswagen Sao Bernardo do Campo plant in Sao Paulo, Brazil, has been called off, after Volkswagen agreed to suspend plans to cut jobs, according to the BBC.

Volkswagen employs 21,000 people at five plants in Brazil and said in July that it would reduce the workforce by 6-8,000.

The Sao Bernardo do Campo plant, also known as Anchieta, is the largest Volkswagen plant, employing around 12,000 people. It is also the oldest car plant in the country, and produces a range of new and older models including the Gol, Saerio, Polo, Polo Calssic, Santana Fox and Kombi, at a rate of 960 vehicles a day. There are also an engine plant and a foundry on the site.

Assembly volumes at the plant have been hit by the appreciation of the Real, which has resulted in a sharp reduction in exports. Volkswagen has been in talks with unions to negotiate a restructuring of its Brazilian operations for several months. The recent indefinite strike action followed the issue of 1,800 lay-off notices at the end of August that would have been due to take effect from November.

Volkswagen has set a deadline of mid-September for a deal to be reached, according to the BBC, but it has not ruled out closing the plant completely if necessary. Volkswagen said that the plant would not longer be eligible for new investments if the structuring plan, that would including laying off thousands of workers, is not approved.

Last week, Brazil's state-run development bank BNDES said late on Monday it would halt a loan worth 497m reais ($US232m) to VW until it concludes negotiations with the unions and decides the plant's fate.

According to Reuters, unions are meeting today to discuss the restructuring plan.