Volkswagen bosses are preparing to shut three German factories and sack “tens of thousands” of workers, the car giant’s top employee representative has claimed.

The German car giant is also planning to cut pay by 10pc as part of a far-ranging shake-up, according to the VW works council, which represents rank-and-file employees.

Daniela Cavallo, head of the group, told hundreds of staff about the plans during a meeting at the company’s Wolfsburg plant on Monday.

Ms Cavallo said: “Management is absolutely serious about all this. This is not sabre-rattling in the collective bargaining round.

“This is the plan of Germany’s largest industrial group to start the sell-off in its home country of Germany.”

Volkswagen is under pressure to cut costs and remain competitive amid weaker demand from China and Europe, and as it struggles to fund the shift to electric vehicles. It is lagging behind competitors in China in the development of battery-powered cars.

Thomas Schaefer, who runs the Volkswagen brand within the broader group, said: “We are not earning enough money with our cars currently. At the same time, our costs for energy, materials and personnel have continued to rise. This calculation cannot work in the long term.”

He said some individual factories were twice as expensive as rivals, adding: “We cannot continue as before. We must quickly find a joint and sustainable solution for the future of our company.”

Ms Cavallo said the works council, which holds half of the votes on VW’s governing supervisory board, mostly agreed with executives about the scale of the carmaker’s problems. But she added: “We are miles apart on the answers to them.”

She suggested executives had two days to back away from the proposals or risk strikes.

In a warning to Oliver Blume, VW’s chief executive, she said that staff could “break off the talks and do what a workforce has to do when it fears for its existence”.

Thousands of staff gathered outside VW’s Wolfsburg headquartered on Monday, blowing horns and whistles, and brandishing signs.

Ms Cavallo’s remarks will be seen as a major escalation of the conflict between Volkswagen’s workers and management over the company’s future direction.

A Volkswagen spokesman declined to comment on the details of the company’s plans, but said: “This is the only way to finance further investments in the future from our own resources.”

The company said it would outline public proposals for how to cut its operating costs alongside third quarter results due on Wednesday.

Gunnar Kilian, Volkswagen Group board member, said: “Without comprehensive measures to regain competitiveness, we will not be able to afford essential investments in the future.”