BERLIN — Volkswagen's top labour representative has urged the carmaker's management board to assign a new vehicle model to Germany to boost flagging capacity utilization or risk missing hard-fought productivity goals.

The carmaker's powerful unions are concerned that a 3.8 per cent drop in first-half group vehicle output in Germany, fueled by waning demand for the Golf and Passat models, could inspire further cuts in Volkswagen's (VW) high-cost home market.

Europe's largest automaker last November agreed with unions to cut thousands of jobs through natural attrition, weed out red tape and cut R&D costs under a so-called future pact to revive the core namesake brand.

To counter any weakening at Wolfsburg, VW's core plant employing over 60,000 people and grappling with low demand for the aging Golf, management should overhaul assembly lines to be able to build an extra 40,000 Tiguan sport-utility vehicles (SUVs), VW's most sought-after model at present, works council chief Bernd Osterloh said.

'A high capacity utilization of German plants is crucial for the success of the company and the jointly agreed future pact,' Osterloh said on Wednesday in emailed remarks to Reuters.

'Only by means of a high capacity utilization we can achieve the productivity targets.'

VW couldn't be reached for comment outside business hours.

The carmaker plans to raise productivity at its German factories by 7.5 per cent this year and next, and a further 5 per cent in 2019 and 2020, counting on fixed-cost cuts and fine-tuning of R&D, procurement and production operations.

Investors have said a turnaround at the long-struggling VW brand is key to reviving the group's fortunes following a costly diesel emissions test-cheating scandal.

Osterloh, a member of VW's supervisory board, said the carmaker has earmarked another 500 million euros (US$587.20 million) in cost savings on top of the 1.5 billion of efficiency gains already budgeted this year, without providing details.

VW's works council want the new model to be assigned to one of the three auto-making plants in Wolfsburg, Emden and Zwickau, Osterloh said.

Wolfsburg has already been chosen to build an SUV model of VW's Spanish division Seat in 2018, using the German group's cost-saving MQB modular platform that underpins the Tiguan.

VW's powerful unions, whose members occupy half the 20 supervisory board seats, threatened to withhold support for mid-term group spending plans on models, plants and technology due to be discussed by the board in November without a production roadmap from management, Osterloh said.

'It's completely clear that the workers will only approve the budget round if the German plants are utilized as agreed under the future pact,' he said.