Unions prepare for confrontation with Volkswagen following plant closure threat.

• Volkswagen is preparing for a confrontation with trade unions following its announcement that it may have to shut down its factories in Germany for the first time in almost 90 years.
• On Wednesday morning, approximately 18,000 workers at a town hall meeting in Wolfsburg will hear Volkswagen's management reveal its plans.
• There are rumors that the car manufacturer may shut down its facilities in Osnabrueck, Lower Saxony and Dresden, Saxony.

Volkswagen is preparing for a confrontation with trade unions following its announcement that it may have to shut down its factories in Germany for the first time in almost 90 years.

On Wednesday morning, at a town hall meeting in Wolfsburg, Volkswagen's management is expected to reveal its plans, which have been the subject of speculation, including the possibility of shutting down sites in Osnabrueck and Dresden.

CNBC could not obtain a comment from a Volkswagen spokesperson on Tuesday.

On Monday, Volkswagen announced that it could not rule out plant closures in Germany due to the challenges facing Europe's top legacy carmakers.

The company, based in Wolfsburg, stated that it was necessary to terminate its employment protection agreement, a program that has been in place since 1994, in order to make "urgently needed structural adjustments for greater competitiveness in the short term."

In a written statement on Monday, Volkswagen Group CEO Oliver Blume stated that the carmaker must "act decisively" to secure its future.

Blume stated that the European automotive industry is facing a challenging and grave circumstance.

New competitors are entering the European market, making the economic environment even tougher, and Germany, as a manufacturing location, is falling further behind in terms of competitiveness.

The proposals were met with criticism from both the General Works Council and IG Metall, two influential groups at Volkswagen. The company stated that they would discuss all necessary measures with these groups before making any decisions.

Daniela Cavallo of Volkswagen's General Works Council stated that the faction would "vehemently" oppose any plant closure measures, while a representative from IG Metall characterized the plan as one that "threatens the very existence of Volkswagen and puts at risk a large number of jobs and locations."

'A central pillar for growth'

The stock price of Volkswagen fell by more than 33% over the past five years, with shares dipping 0.5% at around 12:50 p.m. London time on Tuesday.

Amid a challenging economic climate and an influx of new competitors in Europe, Volkswagen struggles to adapt to the shift towards electric vehicles.

On Monday, Thomas Schäfer, CEO of VW brand, stated that the situation is extremely tense and cannot be resolved through simple cost-cutting measures.

He emphasized the importance of discussing sustainably restructuring the brand with employee representatives as soon as possible.

The politically charged atmosphere in Germany, following the recent regional elections that saw the ruling coalition in Berlin suffer heavy losses, has made Volkswagen's consideration of unprecedented plant closures even more challenging.

The German automotive industry is a vital contributor to the country's growth and prosperity, producing globally successful products and innovations, as stated by a German government spokesperson via email. No specific comment was made regarding Volkswagen's planned measures.

The spokesperson stated that the company is currently undergoing a challenging phase of transformation towards electromobility, which necessitates the adaptation of traditional structures and measures for increased competitiveness.

"The German automotive industry is known for its close social partnership. As such, the Federal Government urges the social partners involved to maintain this commitment in the future."

The issues at Volkswagen are indicative of a broader industry problem, according to Thomas Besson, head of automotive research at Kepler Cheuvreux.

On Tuesday, Besson informed CNBC's "Street Signs Europe" that the global automotive industry is experiencing significant fragmentation.

Volkswagen has implemented specific guarantees for workers, as stated by the speaker.

— CNBC's Annette Weisbach contributed to this report.