Volkswagen's CEO expects labour unions to make proposals on how to cut costs and close a gap with competitors, two days before talks over plant closures and new wage deals, Reuters reported.

VW earlier this month cancelled long-standing job security schemes and said it was considering plant closures in its home market for the first time, the report noted. This prompted a clash with unions who have pledged fierce resistance. In a sign of how tense the situation has become, talks about a new wage agreement and future budgets are slated to start a month ahead of schedule on 25 September.

Unions have ruled out plant closures, leaving the question of where savings will come from without job cuts.

"I expect to see significant movement there in order to make progress on the cost side," Reuters quoted VW group CEO Oliver Blume telling broadcaster RTL/ntv.

"Costs at Volkswagen are too high compared to international competition," Blume said, adding the group would be reviewing all levers in the coming weeks regarding cuts of development, materials, fixed, manufacturing and retail costs.

According to Reuters, he said labour costs in Germany were twice the European level, also telling German broadcaster ZDF the aim was to get a broad deal on investments and labour agreements this year.