By Giulio Piovaccari and Christina Amann

MILAN (Reuters) -Volkswagen is considering a plan to divest from its design and engineering unit Italdesign, union representatives told Reuters on Monday, as part of the German automaker's efforts to overhaul its European operations.

The group is assessing a possible sale of Turin-based Italdesign, but it could also consider alternative options, including finding a partner for it, representatives of the Fiom and FIM Cisl unions said after a meeting with Italdesign management earlier on Monday.

Volkswagen, which fully owns Italdesign through its premium Audi unit, is under pressure from increasing competition and a lacklustre European car market.

A spokesperson for Audi said it "continuously reviews its strategic alignment, including its holdings".

Italdesign employs some 1,350 people, including 1,100 in the northern Italian city of Turin, and generated turnover of 332 million euros ($374 million)last year.

Volkswagen has received preliminary expressions of interest from four or five counterparts, the union representatives said, adding the German company was not willing, at least for now, to consider offers from competitors or financial groups.

"The management confirmed in the meeting that Audi is assessing a possible sale of Italdesign," Gianni Mannori of Fiom union told Reuters, adding Italdesign management has been tasked to find buyers.

The whole process could take a few months, Mannori said, adding that Italdesign is a profitable business.

Rocco Cutrì, the head of FIM Cisl union in Turin, said Audi was running a preliminary due diligence process at Italdesign, to prepare the unit for the plan.

Italdesign was founded in 1968 by Giorgetto Giugiaro, one of the world's most influential car designers, who sold it to Volkswagen in 2010. The German group took the full ownership in 2015.

Over its history, Italdesign created models for several brands including Volkswagen Golf, Fiat Grande Punto, Alfa Romeo 159 and, more recently, Audi Q2 compact SUV.

Volkswagen announced sweeping changes to its German operations in December, including job cuts and sharp capacity reductions. Measures included the end of production of Volkswagen-branded cars in Dresden and Osnabrueck, while the company is exploring alternative uses for the plants.

Audi has already closed its plant in Brussels after the search for a buyer ended without success.

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(Reporting by Giulio Piovaccari; additional reporting by Christina Amann in Berlin;Editing by Keith Weir)