German weekly car magazine Automobilwoche said Saturday VW's head of brands, Wolfgang Bernhard, proposed to cut the cost of manufacturing the smallest European model, the Polo, by 2,000 euros ($2,500) per vehicle starting in 2008.

The weekly reported Bernhard saying he also wanted to offer Europeans a no-frills model, the Fox, which is currently produced in Brazil.

Volkswagen declined to respond, saying it did not comment on speculation about models. The company also partly denied a report in news weekly Der Spiegel that 30,000, not 20,000 jobs in Germany, might be eliminated as Volkswagen raises productivity.

Job cuts ahead?

VW's head of personnel, Horst Neumann, said through a spokesman he had not spoken of any specific number. The spokesman declined to say which number was correct. Neumann had claimed the "situation at Volkswagen is serious, but there is no reason for panic."

Earlier in the week, Bernhard urged employees at the carmaker's biggest German plant to support restructuring efforts, saying it was the best way to guarantee their jobs.

Speaking to some 18,000 workers Thursday in Wolfsburg, Bernhard said the only way to continue to run the plant, where labor costs are triple what they are else where in the company, would be to cut costs.

"Let's pull together and get this place back in shape so your jobs will be safe," he reportedly said at an event that was closed to the news media. The company has already made cuts to material and production costs, he said.

"Now we need to make our labor costs more competitive. If we can achieve that, then we can produce cars at a competitive price."

Earlier in the week, Volkswagen announced plans to extend its shortened work week from 28.8 hours to the more standard 35 hours, without an increase in pay, in an effort to trim costs. Unions have rejected the proposal. Negotiations with employees and their representatives are have already begun in several plants.