Union leaders threatened strikes and warned Volkswagen on Wednesday against making a "historic mistake" as the two parties began pay negotiations, in talks that are expected to shape how aggressively Europe's largest automaker will pursue layoffs and potential plant closures in Germany.

Tensions at the carmaking giant are running high as the specter of factory closures, which would be a first for the company in Germany, has set it on a collision course with the IG Metall union, which has vowed to fight any such moves.

IG Metall must also negotiate new labor deals for the core VW brand's 130,000 workers in Germany after the group earlier this month ended agreements that had safeguarded employment at six of its plants in western Germany since the mid-1990s.

Worker representatives have vowed to wage a "bitter resistance" against job cuts as they started crunch talks with the auto titan Wednesday, blaming top management and the government's faltering support for Volkswagen's ills.

IG Metall threatened strikes, which are possible from the start of December, and insisted on a 7% pay rise.

"A good shepherd looks after his sheep and keeps them together. Volkswagen's shepherd is threatening to rip the skin off their bodies and then throw them out in a hurricane," Thorsten Groeger, IG Metall's chief negotiator with Volkswagen, told workers outside the talks venue in Hanover.

"Anyone who sows fear and gambles with the future of our colleagues will reap bitter resistance," vowed Groeger. "You don't build the future with fear – you destroy it with fear."

Daniela Cavallo, head of the powerful works council at VW went back into Volkswagen's 87-year history, referencing the expropriation of trade union funds during the Third Reich.

"With an average interest rate, this capital, which the Nazis had robbed from the labor movement at the time, would have generated billions of euros over the decades. This money, our money, is in the Volkswagen Group today," she said.

Cavallo warned that unions still maintain a "strong influence" at Volkswagen.

"At Volkswagen, profitability and job security are corporate goals of equal rank," she said in a speech, as some 3,000 workers rallied outside the building in Hanover, waving IG Metall flags and banners.

She stressed a preparedness to compromise, but added that it was now up to management to find a solution.

Some workers held up signs saying, "Shortage of skilled workers on the board – we are looking for experts."

Volkswagen argues that high energy and labor costs in Germany, Europe's top economy, put it at a disadvantage to European peers as well as Chinese rivals that have set their sights on a big slice of the region's electric vehicle market.

'Falling behind'

Reinforcing that message at the start of the talks, the VW brand's personnel chief said the division must cut costs to stay competitive.

"Germany is falling behind the competition. Our core brand, Volkswagen, is particularly affected by this. International competition is threatening to overtake us," Arne Meiswinkel said. "We must work together to restructure our company. The situation is serious."

The task was to find viable solutions, said Meiswinkel, the mention of whose name was greeted with boos during Groeger's speech.

The talks are taking place at Schloss Herrenhausen, a 19th-century residence for Hanoverian royalty.

They come as Germany's industry as a whole is struggling with high costs, labor shortages and rising competition, leading heavyweights, including BASF and Thyssenkrupp, to consider paring back their activities.

Other German automakers are feeling the pain, too, with Mercedes-Benz and BMW cutting their profit forecasts in recent weeks due to weak demand in China.

The standoff has worried Germany's coalition government, which is already struggling to lift economic growth and its own popularity ahead of federal elections next year.

Economy Minister Robert Habeck said during a factory visit last week that he wanted to help Volkswagen through a period of cost-cutting without having to resort to site closures, but said there were limits.

Groeger acknowledged the company faced major challenges but said Volkswagen's success over decades was based on solving problems with employees, not confrontation.

"To first give notice – to smash the china and then wonder at the mess: this is a blatant taboo break – and a historic mistake. Plus, it could also cost a lot of money," he said.

Volkswagen's management "should circle one day in their calendars in bold: December 1st. That's not just when the first window on the Advent calendar will be opened. But strikes are possible from 00:01 on this day," Groeger said.