Wage contract talks between Volkswagen and the IG Metall trade union are continuing on Thursday (28 September) as reports emerge that the two parties are coming close to some kind of an agreement.

Klaus Dierkes, chief negotiator for Volkswagen, told dpa-AFX news on Wednesday evening, during a break in the negotiations, that the two sides were coming 'much closer'. He hoped that there would be a breakthrough during talks today.

IG Metall chief negotiator, Hartmut Meine, said that the company had dropped its 'blockade stance'.

Volkswagen's key demand is that workers return to a 35-hour week, up from the current 28.8-hour week, for no additional pay. That should significantly improve the competitiveness of the VW brand.

Meine said that the Volkswagen representatives seem to have understood that an acceptance of a longer working week needs to be preceded by concrete commitments to invest in the six west German plants and assign new products to them so that capacity can be effectively used. According to Meine, quoted by dpa-AFX news, the discussions are now focused on plant-by-plant details.

Dierkes told the news agency that VW has met the union's demands and that now the discussion is focused on wage contracts. The union also is asking for some kind of profit share for its workers.

Dpa understands that talks were on the verge of collapse yesterday morning because Volkswagen would not give precise commitments on future models and investment. This appears to be at least partly due to differing views in the Volkswagen camp.

In February this year, Volkswagen CEO Bernd Pischetsrieder said that Volkswagen needed to reduce its headcount by at least 20,000 jobs in Germany. This should mainly be possibly through voluntary measures. Since February around 4,000 jobs have gone.

At a works meeting in Wolfsburg on Wednesday, the Volkswagen board member with responsibility for human resources, Horst Neumann, appealed for support for the company's restructuring course. He said that while Volkswagen brand sales are going well at the moment, "the German plants are only just managing to keep their heads above water in terms of earnings and are miles away from our ROI target."

He added that for competitive production of the Golf in Wolfsburg, a substantial cost gap, including a difference in labour costs, still had to be closed. Neumann was referring back to a threat made by Pischetsrieder earlier this year to relocate Golf production to a lower cost country if necessary.