Volkswagen braces for showdown with unions after warning of possible German plant closures

German automotive giant Volkswagen is bracing for a showdown with trade unions shortly after it said it cannot rule out shutting factories in its home country for the first time in its nearly 90-year history.

Volkswagen's management is expected to lay out its plans before about 18,000 workers at a town hall meeting in Wolfsburg on Wednesday morning, amid speculation that the carmaker could push to close sites in Osnabrueck in Lower Saxony and Dresden in Saxony.

A spokesperson for Volkswagen was not immediately available to comment when contacted by CNBC on Tuesday.

In a move that underlines the challenges facing Europe's top legacy carmakers, Volkswagen warned on Monday that it would no longer be able to rule out plant closures in Germany.

The Wolfsburg-headquartered company also said it felt compelled to bring an end to its employment protection agreement — a job security program that has been in place since 1994 — in order to secure "urgently needed structural adjustments for greater competitiveness in the short term."

Volkswagen Group CEO Oliver Blume said in a written statement on Monday that the carmaker would need to "act decisively" in order to future-proof the company.

"The European automotive industry is in a very demanding and serious situation," Blume said.

"The economic environment became even tougher, and new competitors are entering the European market. In addition, Germany in particular as a manufacturing location is falling further behind in terms of competitiveness," he added.

Volkswagen said that all necessary measures would be discussed with the General Works Council — a group of elected staff members that represent the interests of a company's workforce — and with top German industrial union IG Metall. Both