Volkswagen has announced plans to cut 30,000 jobs worldwide with about 23,000 of the losses borne in Germany.
VW, still dealing with the aftermath of the emissions-cheating scandal, aims to rejuvenate its core brand, and develop new electric and self-driving cars.
VW says it will create 9,000 jobs as part of investments in new products.
The cuts should bring annual savings of €3.7bn (£3.2bn; $3.92bn) by 2020. VW and unions have been hammering out a plan to revive its fortunes since June.
Volkswagen chief executive, Matthias Mueller, said it was “the biggest modernisation programme in the history of the group’s core brand”.
“The VW brand needs a real shake-up and that is exactly what the future pact has turned out to be,” he added.
The car giant – which employs 610,000 people in 31 countries – wants to increase the brand’s profit margin from 2% to 4% and to do this it will need to improve productivity at its German plants by 25%.
It has 120,000 workers in Germany so the cuts represent a fifth of employees in its heartland.
Volkswagen has pledged there will be no compulsory redundancies and the top staff representative in Germany, Bernd Osterloh, said the new models would be built there: “The next generation of electric vehicles will be made here in Germany, not abroad.”
Volkswagen has been battling a crisis caused by its attempts to dodge strict US emissions limits.
It was revealed in the US last year that VW’s diesel cars were fitted with software that “knew” when cars were being tested.
The company has agreed to pay $15bn in a settlement with US authorities and owners of about 500,000 vehicles.
Around 11 million cars worldwide have the software.
The VW group comprises 12 brands from seven European countries: Volkswagen passenger cars, Audi, Seat, Skoda, Bentley, Bugatti, Lamborghini, Porsche, Ducati, Volkswagen Commercial Vehicles, Scania and MAN.
Professor Christian Stadler, from Warwick Business School, said Friday’s announcement about electric cars marked “a new strategy in a rapidly changing car market”.
China, the world’s biggest car market, is introducing an e-vehicle quota in 2018, where 8% of all vehicles sold will have to be electric. That quota rises to 12% in 2020.
Prof Stadler said: “It means VW would have to sell 60,000 e-vehicles in China by 2018, and hybrids only represent half a point. Even BMW, one of the pioneers of electronic cars has sold just 1,204 e-vehicles in China in 2016 up to September.
“Norway’s sovereign wealth fund holds a sizeable stake in VW and has been putting pressure on them to become more environmentally friendly.” he said.