Volkswagen and its German workers union are set to resume critical talks over planned wage cuts on Friday, overshadowed by a threat from its influential works council chief to break off the talks if no immediate progress is made.

Management wants the 100,000 German employees at the VW brand's six western German plants to work longer hours for no extra pay while the union is demanding some form of compensation along with investments which would protect jobs.

In particular, Volkswagen wants workers to return to a 35-hour working week from the current 28.8-hour week at no extra cost, as the company already groans under the weight of the highest employment costs in the industry.

Formerly state-owned and protected from takeovers by federal law, Europe's biggest carmaker has been run under the guiding principle that securing jobs is as important as earning money.

But now that Asian carmakers are launching an offensive in its home market Volkswagen has been rudely awakened to a rapidly deteriorating market that is forcing it to change its system of co-management with labor.

Unprofitable at home and burdened by substantial legacy costs, its problems have been likened to those of deeply troubled U.S. carmakers General Motors and Ford .

However, compulsory redundancies in Germany have been ruled out before 2012 under an earlier deal and the first round of unofficial wage talks ended on Monday with both Volkswagen and IG Metall still far apart.

On Wednesday, works council boss and key supervisory board member Bernd Osterloh said labor would walk out of the talks if no progress could be reached on Friday.

We definitely will not accept a 'maybe' or 'we'll see' when we are dealing with securing the future for our plants, Osterloh said.

If there is no movement, then it's time to stop playing around and we break off the talks, he continued.

For its part, the company has threatened to shift production of its flagship Golf hatchback from its under-utilized Wolfsburg plant if it does not succeed in cutting labor costs.

Volkswagen's personnel boss Horst Neumann, ironically handpicked for his position by IG Metall, has called upon workers to make their contribution to the restructuring of VW's German operations, which the company has said posted a loss in the high hundreds of millions of euros last year.

In an interview with Reuters last week Osterloh called for a quick deal, since neither side could wait until November when VW's board is expected to sign off on a rolling investment plan that includes deciding on future Golf production at Wolfsburg.