VW brand chief eyes 3.7 bln euros of cost cuts by 2021 -sources

By Andreas Cremer and Ilona Wissenbach

BERLIN/FRANKFURT (Reuters) - Volkswagen is targeting about 3.7 billion euros ($4.1 billion) of cost cuts at its core car brand by 2021 as it wrestles with labour leaders over a turnaround plan, sources said.

Europe's biggest carmaker needs to come up with savings at high-cost operations in Germany to help fund a shift to electric cars and self-driving vehicles while facing billions of euros in costs from its emissions scandal.

About 3 billion euros of the cutbacks would affect operations in Germany where VW is based and has some of its biggest plants, two sources familiar with the negotiations between labour and management told Reuters on Thursday.

The targeted savings would follow a 5 billion euro efficiency programme announced by Volkswagen (VW) in 2014, of which about 2.5 billion euros has already been realised, the sources said.

The cuts would help VW to lift the operating margin at its troubled core brand to 4 percent by 2020 from an expected 2 percent this year, the sources said.

That's less than a previous 6 percent target and below profitability benchmarks at rivals Renault, Peugeot, Ford and General Motors.

VW declined to comment. The works council did not return calls seeking comment.

Talks between brand management and labour leaders are faltering at the moment with investment pledges and cost savings proving stumbling blocks, the sources said.

Raising the pressure on management ahead of a staff gathering at the company's Wolfsburg headquarters on Thursday, labour bosses warned that the pact -- viewed by analysts as key to VW's longer-term future -- could still fail if executives withhold commitments to fixed targets and quotas for products, output and investment.

($1 = 0.9121 euros)

(Editing by Maria Sheahan/Keith Weir)