The German car maker's plan is part of an effort to recover from the diesel emissions cheating scandal and to invest further in electric and self-driving cars.
In what is Volkswagen's biggest restructuring plan in history, the European car manufacturing giant has announced it will cut 30,000 jobs worldwide at its core VW brand by 2020 to raise the company's annual savings to $3.9 billion.
The move is part of Volkswagen's effort to recover from last year's diesel emissions cheating scandal and invest further in electric and self-driving cars, which will create future jobs.
Volkswagen in June agreed to a $15.3 billion settlement to buy back emissions-cheating diesel vehicles and to compensate consumers.
The German car maker admitted in September last year to committing a systematic rigging to cheat environmental tests since 2009 to conceal the fact that its diesel vehicles were emitting far more pollutants than allowed under US and California law.
The car maker also plans to increase the VW brand's profit margin from two to four percent by 2020.
Volkswagen's labour leaders said management had agreed to avoid forced layoffs in Germany until 2025, a step which clears the path for cutting 23,000 jobs via buy-outs, early retirement, and reducing part-time staff.
Labour leaders agreed to the cuts in exchange for a management pledge to create 9,000 new jobs in the area of electric cars, mainly at factories in Germany.
"The most important message is the jobs of the core workforce is secure," Volkswagen's Works Council chief Bernd Osterloh said at a news conference in Wolfsburg on Friday.