Labor leaders at Volkswagen AG offered €1.5 billion ($1.6 billion) in additional cost cuts as management pushes for broad savings to steady the beleaguered carmaker.

VW’s works council chief Daniela Cavallo on Wednesday called for lowering shareholder dividends and suspending portions of bonuses for workers, executives and board members as part of the proposal. She said management is currently targeting about €17 billion in overall cost reductions, of which labor is a small part.

Cavallo, speaking at a press conference a day before labor leaders sit down with VW management for a third round of negotiations, acknowledged the need for staff reductions but insisted that factory closures could be avoided under labor’s proposals. In offering the additional cuts, Cavallo said management needs to reinstate job security agreements and keep factories open.

The two sides remain divided over how to cope with a slump in demand for electric vehicles, high operation costs and increasing competition from Chinese manufacturers. VW management is pushing for unprecedented cuts at its namesake brand in Germany, including the closure of three plants, tens of thousands of layoffs, wage cuts, a two-year pay freeze and redrawing union pay tables.

VW, following Cavallo’s remarks on Wednesday, reiterated that factory closures can’t be ruled out.

In their counterproposal, labor leaders said some money earmarked for wage increases go into a fund that would help cover possible layoffs and short-term work measures.

If VW sticks to its demands including shuttering plants, then it needs to brace for “an industrial dispute over locations like this country hasn’t seen in decades,” Thorsten Gröger, the lead negotiator for the labor side, said at the same event.

Warning strikes are expected for early December if no agreement is reached by then.

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