Net profit fell to 1.58 billion euros ($1.7 billion) year-on-year, said the group, which is planning an unprecedented restructuring that could include thousands of job cuts.

The German car giant -- whose 10 brands range from its core VW models to Seat, Skoda and Porsche -- has been hit hard by high manufacturing costs, a stuttering switch to electric vehicles and increased competition in key market China.

Global vehicle deliveries fell by seven percent in the July to September period, Volkswagen said, with an increase in sales in North America failing to offset a 15-percent fall in China.

Sales of the group's electric models were down 10 percent.

Volkswagen's results were also impacted by "higher fixed costs" and restructuring expenses, it said.

VW finance chief Arno Antlitz said the group's lacklustre performance so far this year reflected a "challenging market environment" and highlighted the "urgent need for significant cost reductions and efficiency gains".

Volkswagen stunned employees in September when it announced it was considering closing factories in Germany for the first time as part of a massive cost-cutting drive to improve competitiveness.

The savings efforts are focused on the core VW brand, which reported an operating profit margin of only two percent over the first nine months.

Volkswagen labour leaders told staff on Monday that at least three VW brand factories were at risk in Germany and that tens of thousands of jobs could be slashed. Other factories would be downsized and pay cuts of 10 percent loomed for remaining employees, they warned.

Worker representatives have vowed to put up strong resistance to the plans, with possible strike action starting in December.

Volkswagen bosses have not commented on the details of the savings drive but have described the situation as "serious".

The group will hold a second round of talks with the powerful IG Metall union on Wednesday. The union is seeking a seven-percent pay rise for workers, which bosses have rejected.

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Volkswagen

PORSCHE AUTOMOBIL HOLDING