"The current situation is serious," Blume said at the meeting, according to a press release.
"That's why urgent measures are needed to secure the future of Volkswagen," he added.
Blume said competitive pressure is increasing while demand is shrinking.
"What's more, our labour costs in Germany have now become too high."
With regard to the ongoing wage dispute with the IG Metall trade union that sparked a wave of strikes earlier this week, Blume emphasised: "We are jointly interested in finding a solution."
The chief executive argued that the plan put forward by the union to prevent redundancies is insufficient.
However, it could be a "starting point" for negotiations, he said.
"Our products are good, now we have to reduce costs in all areas," Blume said.
"We can build the best cars in the world - but that doesn't matter if we don't earn any money with them."
Daniela Cavallo, chairwoman of the Volkswagen works council, on Wednesday called on management to make concessions
"It is up to the board of management to decide how to proceed before Christmas," she said.
She said IG Metall has made a step towards the company's position with its proposals to make savings without closing plants, cutting wages by 10 per cent or enforcing mass redundancies as announced by management.
Now it also expects the company to make concessions, said Cavallo, adding that the company's management has so far insisted on its maximum demands.
According to the works council, more than 20,000 employees took part in the meeting.
Due to the large number of people, the meeting was also broadcast outside on a screen.
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