HAMBURG, Germany - German engineering sector union IG Metall has agreed with Volkswagen to extend job guarantees at the carmaker's western German plants by three years until 2014, the union said on Tuesday.

A spokesman said the union's wage commission needed to approve the deal, negotiated for months against a backdrop of sputtering growth, weak car markets and rising unemployment in Europe's keystone economy.

A joint news conference was scheduled for 1200 GMT.

Europe's biggest carmaker had raised the hopes of 90,000 workers in its high-wage western German plants in November when its personnel director told Reuters job guarantees may be lengthened until 2014.

Volkswagen, BMW, Daimler and other European carmakers have granted staff job guarantees for several years -- usually in exchange for a pay freeze, longer hours, more flexible working agreements or other concessions.

Volkswagen's in-house deals are unusual in a country where unions tend to negotiate pay accords for an entire industrial sector, but economists are still paying attention.

Ultimately, this is setting the tone for what will happen in other branches of the engineering and metalworking industry, said DekaBank economist Andreas Scheuerle. It sounds like wage negotiations in (the German state of) North Rhine-Westphalia are in the final stages and also focusing on job guarantees.

VW chief executive Martin Winterkorn aims to boost productivity 10 percent a year, a goal labor supports as long as it does not lead to forced job cuts.

VW employs around 370,000 staff worldwide, of which 150,000 work in Germany. The 90,000 workers in the western German plants agreed five years ago to forego wage hikes and a four-day work week in return for job guarantees. The changes targeted 1 billion euros ($1.36 billion) in annual savings.

Volkswagen has weathered the downturn on global car markets well thanks to its presence in growth markets like China and Brazil and the boost European markets got from state incentives for buyers of new cars.

It has transferred excess assembly workers into parts production and plans to keep staffing stable by rolling out new models as it pursues its ambition to take over from Toyota as the world's leading carmaker.

Volkswagen shares were up 0.6 percent at 56.16 euros by 0947 GMT, underperforming a 1.7 percent gain in the DJ Stoxx European Autos Index .SXAP.

(Additional reporting by Sarah Marsh in Berlin; Editing by Dan Lalor)

($1 = 0.7345 euro)

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