The plan, announced on Wednesday, comes a day after the German automaker warned it would cut jobs as it speeds up the rollout of electric cars, which are less complex to build and require fewer workers.
Volkswagen has struggled to raise profitability at the VW brand for years. Last year, the brand's operating margin fell to 3.8 per cent, lagging peers such as Peugeot which delivered a margin of 8.4 per cent.
The VW brand is targeting a 6 per cent margin in 2022.
Volkswagen has ruled out compulsory layoffs until 2025, but early retirement of staff working in administrative positions at the company's headquarters in Wolfsburg, Germany, will help reduce the workforce by 5,000 to 7,000, it said.
The new cost cutting drive is a continuation of Volkswagen's 3 billion euros Zukunftspakt savings plan. So far, VW has realised around 2.4 billion euros of the planned 3 billion annual cost savings by 2020.
The 5.9 billion euro target for 2023 comes on top of the 2020 target, the company said.
At the same time, VW will create 2,000 new software jobs, as well as electronics positions in technical development, it said.
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