Volkswagen and its union traded threats on Wednesday ahead of renewed wage talks, with several thousand workers staging short work stoppages and the company's personnel chief warning of dramatic job cuts if the automaker doesn't get cost savings, the Associated Press (AP) said.

Workers walked off the job for three hours at the company's headquarters in Wolfsburg and at a plant in the western city of Kassel to underline wage demands in talks to resume Thursday.

Union leaders have said they will step up the short warning strikes if a deal isn't reached by the end of this month, AP noted, adding that Volkswagen's head of personnel Peter Hartz said that if the company doesn't get the savings it wants it will have to cut back jobs in high-wage Germany.

"If we do not implement our cost concept, our employment level in Germany will shrink dramatically," Hartz was quoted as saying by the Frankfurter Allgemeine Zeitung on Wednesday, according to AP.

"That would be a bitter thing," he said. "Because we want to secure our competitiveness - and therefore Volkswagen jobs - in the wage negotiations."

AP noted that Volkswagen says it needs to cut costs 30% by 2011. It has offered to guarantee the jobs of its 176,400 workers in Germany in return for a two-year wage freeze. The union is demanding a 2.2% pay rise in the first year, and a 2.7% rise in the second year - budging from a previous demand for 4% annual raises.

Hartz reportedly said the company wanted to guarantee 3,000 jobs at its Wolfsburg base making a new sport utility vehicle based on the compact Golf platform. "But that will require cost concessions," he said. "The labour costs per vehicle today in Wolfsburg are €1,800 above those of the competition." At current rates €1,800 is about US$2,300.

Talks covering 103,000 workers at six German plants resume on Thursday in Hanover, the Associated Press said.

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