Volkswagen plans to close at least three plants in Germany, lay off thousands of workers and shrink its remaining plants as it plans a deeper than expected overhaul.

Europe’s biggest carmaker has been negotiating with unions for weeks over its plans to reorganize its businesses and cut costs, including considering closing factories in Germany for the first time, Reuters reported.

“The leadership is absolutely serious about all of this. This is not noise in the collective bargaining round,” Daniela Cavallo, the head of Volkswagen’s works council, told several hundred employees at the carmaker’s largest factory in Wolfsburg, the report added.

The plans also include pushing for universal wage cuts at VW’s flagship brand of 10 percent and downsizing all remaining locations in the country, said Cavallo, who also sits on VW’s supervisory board.

Chief executive Oliver Blume pointed to the high costs of the VW brand, which faces falling demand in Europe and increasing competition from Chinese companies such as BYD. Unionists say workers are being made to pay for boardroom mistakes, including a botched electric vehicle switch and poor pricing policy, according to reports.

While its premium brands including Audi and Porsche have been the automaker’s biggest source of profit in recent years, they are now struggling. Porsche AG recently said it is weighing cost cuts and overhauling its model lineup after a slump in demand in China hit its profits.

VW’s plans for India

According to media reports, Mahindra & Mahindra (M&M) and Skoda Auto Volkswagen India (SAVWIPL), a subsidiary of the Volkswagen Group, are in the final stages of setting up a 50:50 joint venture. This partnership aims to share costs, technology and vehicle platforms for future product development.

The proposed partnership will primarily focus on developing electric vehicles for both the Indian and international markets, although it will also include fossil fuel-based models. According to reports, an official announcement is expected by the end of the year.

The collaboration will exclude sedans and SUVs currently sold by Volkswagen and Skoda. The deal will also drop the Audi and Porsche brands from the Volkswagen Group. Production of the new models will take place at SAVWIPL and Mahindra’s Chakan facility near Pune, according to reports.

(With contributions from agencies)