Activist investor TCI calls on VW unions, Lower Saxony to back cuts

* TCI says VW letter full of fine ambitions

* TCI says VW unions need to back management

* TCI says VW could save 3 bln euros from staff attrition (Adds detail about staff cuts)

By Maiya Keidan

LONDON, May 18 (Reuters) - Activist investor TCI on Wednesday urged Volkswagen (LSE: 0P6N.L - news) 's powerful trade unions and its home region of Lower Saxony to back management in a drive to cut costs at Europe's biggest carmaker.

TCI was reacting to a letter sent by Volkswagen (Xetra: 766400 - news) (VW) finance chief Frank Witter to TCI, in which VW agreed with many criticisms previously raised by the hedge fund about the need to raise VW's performance and to reform its governance structure.

"It (Other OTC: ITGL - news) 's a letter of fine ambitions but the key point is that the unions and, in particular, Lower Saxony have to back the management team now. Then this could be the turning point for Volkswagen," TCI partner Ben Walker told Reuters.

TCI reiterated it wanted to see VW set tough financial targets, align management compensation with shareholders' interests and control spiralling labour costs.

"Most companies have natural attrition of 4 percent to 5 percent a year from retirements and natural staff turnover. Now (Frankfurt: 11N.F - news) 5 percent of 600,000 employees is 30,000 employees. Don't tell me Volkswagen cannot be run with 580,000 employees," Walker said.

He added VW could save 3 billion euros ($3.4 billion) just from natural attrition.

($1 = 0.8871 euros) (Reporting by Maiya Keidan; Writing by Edward Taylor; Editing by Mark Potter)