Volkswagen and other major carmakers have begun reining in Chinese output, wages and other costs, industry sources told Reuters, as executives at the Frankfurt auto show put a brave face on a sharp slowdown in the world's biggest vehicle market. The German car giant's Chinese joint venture, FAW-VW, is cancelling staff bonuses and cutting shifts at its plants near Changchun, northeastern China, people with knowledge of the matter said. The bonuses being scrapped typically account for more than half of the assembly-line workers' take-home pay. Volkswagen's high-end Audi brand also said it had eased back output at its Chinese plants, trimming the working week to five days from seven in response to lower demand for models such as the A6 saloon. And German rival BMW said on Tuesday it had reduced output of its locally produced 3 and 5 series models. "We reacted relatively fast," Chief Financial Officer Friedrich Eichiner told journalists. "We are not stockpiling." Car sales in China, until recently the profit engine for automakers around the world, have been hit by a cooling economy and a plunging stock market. Demand was flat in the first eight months of the year and could drop in 2015 for the first time since the market took off in the late 1990s. At the opening day of the Frankfurt auto show on Tuesday, industry executives expressed confidence about the long-term growth potential of the Chinese market, and said any short-term hit could be offset by a strengthening recovery in Europe. Industry data showed European car sales jumped 11.5 percent year-on-year in August. But some analysts said the Chinese slowdown was coming at a time when carmakers are still opening factories in the country -- creating an excess of capacity that could weigh on profits. Leading research group IHS Automotive expects carmakers' capacity utilisation rates in China to drop to 65 percent from last year's 70 percent, a key profitability threshold. French carmaker Renault also told Reuters the slowdown in China could drag global auto market growth below the 1 percent it had previously forecast for 2015. It predicts a slight rebound in China next year, with global growth of 2-3 percent, but Europe slipping back from a stronger-than-expected 7-8 percent this year to just 2 percent in 2016. "Very Depressed" "The mood is very depressed at VW, BMW or GM," said Clemens Wasner of Austrian automotive consultancy EFS, which advises several German carmakers in Asia. China has accounted for more than half of VW's profit in recent years and about 40 percent at GM, which is pursuing a $14 billion expansion in China with its local partners. Both VW and GM have already begun trimming local production -- by around 5 percent in July -- according to one China-based consultant. GM President Dan Ammann told Reuters TV he had had "some sleepless nights but we feel like we're in a good position" in China, pointing out that the company was about to release several new sport-utility vehicles (SUVs) "right into the sweet spot where there's still strong growth". GM China chief Matt Tsien said in May that GM was determined to keep operating margins as high as 9-10 percent by selling more SUVs and higher-end cars. It ruled out a significant review of its China plans as recently as July. The U.S. group could nonetheless put the brakes on planned capacity increases, a person close to the company said, and has room to trim costs at existing facilities by halting production for longer breaks, reducing shifts and cutting workers' bonuses. "They can immediately reduce extra months of salary payments which are very common in the good times," the source said. VW CEO Martin Winterkorn told Reuters TV in Frankfurt he remained upbeat about China, but noted a shift in demand there. "The eastern part of China is rather stagnating, while the west is growing," he said. "Many people live in the west and we just built a factory there. We are looking to China with confidence and expect to keep growing." Audi chief Rupert Stadler, meanwhile, told Reuters TV the brand expected "further growth in China over the medium term ... and will not change our investment plans." BMW, the world's biggest luxury carmaker, warned last month its forecasts for this year could be at risk from any further deterioration in the Chinese market, where its sales are falling for the first time in a decade. Eichiner said on Tuesday he saw no reason for BMW to change its full-year targets, though it was too early to talk of a recovery in Chinese demand. German rival Daimler said it had no plans to revise production in China and saw no risk of overcapacity at its plants there. However, PSA Peugeot Citroen's premium DS brand said it was helping its Chinese dealers to refinance and expected to fall short of its full-year sales network expansion target. (Reuters)