Management and workers at Europe's largest auto producer, Volkswagen, began a third round of talks on Thursday over proposed wage cuts, with time running out to avoid strikes at production facilities across Germany.

The company wants some workers to take a 10-percent reduction in pay, saying it is necessary because of falling product demand in Europe, and increased competition from China.

On Wednesday, unions suggested giving up bonuses for two years and, with some factories having separate pay agreements, wage rises going straight into a solidarity fund to support less productive areas of the company while they submit to a temporary reduction in working hours.

Union representatives said this would save 1.5 billion euros ($1.6 billion) and eliminate the need for redundancies.

IG Metall union negotiator Thorsten Groeger said his organization had "made a big step" and needed management to do the same for there to be progress.

"We have opened a corridor for today's negotiations... now it is Volkswagen's board's turn," he said. "We expect them to take this same constructive approach with us."

Daniela Cavallo, chairwoman of the workers' council at the company, said it was an alternative option to job cuts, which she said would "prevent the future instead of creating it", adding that executives should also give up their bonuses.

If worker demands are not met, industrial action will begin at sites across the country from Dec 1, which would be the first strike at the company since 2018.

Volkswagen saw its net profits slump by nearly 64 percent in the third quarter, compared to the same period 12 months earlier.

An auto industry sector analysis published by consultancy PwC in October showed a continuing market drift in favor of electric vehicles, which is forecast to continue in the coming years, and figures contained in it showed that this is a market where Volkswagen is struggling to compete.

Founded as a state-owned carmaker in 1937, Volkswagen was only partly privatized and the state of Lower Saxony, in the north of Germany, still retains a major holding in the company and has a seat on its supervisory board, giving its economic health a political aspect, as well as a commercial one.

The troubles at one of Germany's biggest and most internationally-recognized brand names come at the same time as the country's political system is struggling.

Germany's coalition government recently broke up, and Chancellor Olaf Scholz, who was born in Lower Saxony, faces the prospect of a vote of confidence in the country's parliament on Dec 16, which is expected to pave the way for an early parliamentary election in February.

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