Europe's largest carmaker, Volkswagen has said it is stepping up efforts to cut jobs in Germany through early retirements and offering financial compensation to persuade workers to leave.

The hope is to reverse a slide in earnings, which has come despite rising sales.

In a statement VW said it has "thousands of surplus workers" at its German sites, in particular at its largest factory in Wolfsburg. There are 103,000 workers at its six German plants, producing 940,000 cars a year. The company has refused to comment on a news report that 10,000 jobs are are risk.

Chief Executive Bernd Pischetsrieder plans to cut worldwide costs by 3.1 billion euros this year.

Last year's net income of 677 million euros was down by 77% from 2001's figure of 2.9 billion euros. Christian Wulf, Prime Minister of the State of Lower Saxony, which is VW's largest shareholder, said the company is talking with its unions: "My understanding is both sides will find common ground over the social responsibility of what's been announced in order to keep jobs in this region and in Germany."

The company has said it will honour agreements reached with its trade unions that protected German workers from compulsory layoffs until the end of 2011 in return for a wage freeze.