WOLFSBURG, Germany (Reuters) - Volkswagen plans to shut at least three factories in Germany, lay off tens of thousands of staff and permanently shrink its remaining plants in Europe's biggest economy as the continent's top carmaker is plotting a deeper-than-expected overhaul, the works council head said on Monday.

"Management is absolutely serious about all this. This is not sabre-rattling in the collective bargaining round," Daniela Cavallo, Volkswagen's works council head, told several hundreds of employees in Wolfsburg.

"This is the plan of Germany's largest industrial group to start the sell-off in its home country of Germany," Cavallo added, not specifying which plants would be affected or how many of Volkswagen Group's roughly 300,000 staff in Germany could be laid off.

The comments mark a major escalation of a conflict between Volkswagen's workers and the group's management, which is under severe pressure to cut costs and remain competitive in light of weaker demand from China and Europe.

Cavallo said there was agreement between both sides regarding the nature of the problems the carmaker, and many of its European peers, faces, ranging from a slower-than-expected electric transition to fierce Chinese rivals entering Europe.

"We are not far apart when it comes to analysing the problems. But we are miles apart on the answers to them."