Volkswagen AG’s autoworkers union said it is “closer” to an agreement with the carmaker on preserving jobs and cutting costs in a seventh round of contract talks.

“We’re working together to reach a good solution” and are getting “closer on some points, “the chief negotiator for the IG Metall union, Hartmut Meine, told journalists in Hanover, Germany, where the talks are taking place. Josef-Fidelis Senn, Volkswagen’s negotiator, said it’s “unclear what an agreement will look like” and “anything is possible.”

Volkswagen, Europe’s largest carmaker, has a target of cutting spending at its western German factories by 30% over the next seven years. IG Metall, which has lost half a million members over the past decade, is seeking to safeguard members’ jobs. Workers staged walkouts at Volkswagen’s Wolfsburg, Germany, headquarters yesterday to protest its demand for a wage freeze.

The strike at Wolfsburg, which employs almost half of the carmaker’s 103,000-member western German workforce, followed inconclusive talks yesterday. About 6,000 employees at the commercial-vehicles factory in Hanover participated in demonstrations today, IG Metall said.

“Either we find a compromise in the next few hours or we at Volkswagen will experience a conflict like we’ve never seen before in the history of this company,” the main worker representative at Volkswagen’s factories, Klaus Volkert, told striking employees in Wolfsburg, according to a statement distributed to journalists in Hanover.

Volkswagen shares rose 72 cents, or 2%, to 36.14 euros in Frankfurt. The stock is down 18% this year, the fourth worst performance on Germany’s benchmark DAX index.

The carmaker last week said third quarter net income fell 65% to 76 million euros ($97 million), the seventh straight quarterly drop in profit.

Volkswagen’s Western European sales fell 2% in September and its market share in China is down by more than half since 2000 to 26%. The company last month offered buyers of the new Golf compact car 975 euros worth of incentives, including radios and heating and cooling systems, to spur sales.

German labor law gives unions the right to stage one-hour walkouts, billed as information-exchange sessions, in the first month of negotiations and warning strikes, lasting as many as seven hours, after that. A minimum of three-quarters of workers who vote is needed to approve any longer-term stoppages and only after the parties declare talks deadlocked.

Yesterday’s warning strikes were the third set of stoppages since October 28 in protest at Volkswagen’s demands for a wage freeze. The company is targeting a $2.6 billion reduction in wage expenses by 2011 and wants simplify pay formulas from 4,000 possible combinations to 12.

“Volkswagen is at a critical stage and needs to get an agreement as soon as possible,” said Oliver Caspari, an analyst at Bankhaus Lampe who has a “sell” rating on the stock.

The carmaker last month said it will hire a former chief operating officer at DaimlerChrysler AG’s Chrysler unit, Wolfgang Bernhard, to turn around sales of its namesake brand.

Mr. Bernhard helped oversee 34,000 job cuts at DaimlerChrysler’s U.S. unit and left the Stuttgart, Germany-based carmaker in July, almost three months after his promotion to run the Mercedes Car Group was blocked at a board meeting.