TCI was reacting to a letter sent by Volkswagen (VW) finance chief Frank Witter to TCI, in which VW agreed with many criticisms previously raised by the hedge fund about the need to raise VW's performance and to reform its governance structure.

"It's a letter of fine ambitions but the key point is thatthe unions and, in particular, Lower Saxony have to back the management team now. Then this could be the turning point for Volkswagen," TCI partner Ben Walker told Reuters.

TCI reiterated it wanted to see VW set tough financial targets, align management compensation with shareholders' interests and control spiralling labour costs.

"Most companies have natural attrition of 4 percent to 5percent a year from retirements and natural staff turnover. Now5 percent of 600,000 employees is 30,000 employees. Don't tell me Volkswagen cannot be run with 580,000 employees," Walker said.

He added VW could save 3 billion euros ($3.4 billion) just from natural attrition.

($1 = 0.8871 euros)

--reuters--