Volkswagen AG managers are facing hefty pay reductions in the coming years as part of an agreement with labor to make Europe’s biggest automaker more competitive.

Volkswagen on Friday announced sweeping changes to its German operations, including more than 35,000 future job cuts and sharp capacity reductions in a last-gasp deal between Europe's top carmaker and unions to avert mass strikes.

VW Group threatened to close up to three plants in Germany, but a deal with workers means those plants are safe.

Volkswagen AG and labor leaders reached an agreement to cut capacity at its namesake brand while avoiding factory closures, capping three months of tense negotiations and preventing further union walkouts.

Volkswagen announced sweeping changes to its German operations, including more than 35,000 future job cuts and capacity reductions in a last-gasp deal between Europe's top carmaker and unions on Friday to avert mass strikes.

Volkswagen AG and labor leaders are moving closer to an agreement to restructure the automaker’s namesake brand without shuttering factories in Germany, according to people familiar with the matter.

After prolonged negotiations, the German labour union IG Metall and Volkswagen's management have agreed. VW has decided it will not close any German factories, but it will significantly reduce employment.

Volkswagen on Friday said it had agreed with unions to cut more than 35,000 jobs at its German sites by 2030 in a socially responsible manner, which would help achieve more than 15 billion euros ($15.