Frankfurt, Sept. 4 (Reuters): Volkswagen (VW) could cut more than 10,000 jobs in Germany in the coming few years to make Europe's largest car maker competitive with its international rivals, a magazine said on Saturday.

VW wanted to reduce the workforce in the west German plants drastically, Spiegel magazine said in a report released before publication, quoting internal VW projections. Hit by a strong euro and weak sales, VW has been negotiating with its staff about cost-saving concessions in high-wage Germany.

VW and its main union struck a landmark labour deal in November that freezes pay for staff in western Germany, where it employs some 103,000, until early 2007 in return for job guarantees until the end of 2011. The magazine said VW would even go ahead with the plans if it decided to build a new sports utility vehicle (SUV) at its main Wolfsburg plant. The firm is currently evaluating whether to assemble the car in Germany or in low-wage Portugal.

A VW spokesman said the report was pure speculation. “It makes no sense to join this speculation,” he said.

VW's internal product strategy committee has recommended building the SUV in Portugal from 2007 rather than in Germany, saying assembling the model there would cost at least 1,000 euros less per vehicle than in Wolfsburg. Focus magazine said Wolfsburg looked set to emerge as the assembly plant for the model but staff would then face wage cuts of some 20 per cent and longer working hours.