By the end of the year, 750 temporary jobs of a total 3,700 in Germany would not be renewed, a VW statement said.
But a report in the Frankfurter Allgemeine Zeitung newspaper that 25,000 posts worldwide were on the line is "false," the biggest European carmaker said.
Like its main rivals however, VW would reduce capacity, using "its great production flexibility to adapt to changed market conditions," the company said.
Boss Martin Winterkorn had already warned that 2009 would be a "difficult" year.
Sales director Detlef Wittig said Friday: "We note with concern that the situation for the global sector deteriorated markedly in September."
In mid-day trading Friday VW shares had lost 8.74 percent to reach €208.99 amid a general rout of auto stocks on the Frankfurt stock exchange.
VW has managed better than many rivals to deal with the deteriorating market environment and confirmed Friday that sales this year would be better than in 2007, when they surpassed six million vehicles.
In the nine months from January to September 2008, VW said it had sold 4.8 million units, an annualized increase of 3.9 percent.
Slumping western European sales have been partially offset by strong increases in emerging countries like China and Brazil.