A labor union at German automaker Volkswagen has threatened to go on strike next month after negotiations with management over proposed drastic cost-cutting measures broke down.

The union and management on Thursday held their third round of talks in Wolfsburg, the northern city where the firm is headquartered. Around 7,000 workers gathered at the venue to press their demands.

The union proposed creating a fund worth roughly 1.5 billion euros, or 1.6 billion dollars, by forgoing parts of wages for 2025 and 2026.

The offer was in return for management giving up plans to close plants and implement massive layoffs. Any domestic closures would be the first in Volkswagen's 87-year history.

The union says management told them it would consider the proposals, but has refused to change the overall plans. Organizers say they will start preparations for a walkout early next month.

A union official said the action will be on a scale that will make it very clear to the company that the Volkswagen workforce is serious.

The automaker has been struggling financially amid a drop in demand in Europe and intensifying competition with Chinese electric-vehicle makers.