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UPDATE 1-VW to hand unions management board seat in reshuffle-sources

* VW to replace HR chief at Friday board meeting -sources

* CEO-designate Diess to retain VW brand role -sources

* Group CEO Mueller's removal discussed for months -Bild (Releads on new HR chief, adds detail on Blessing and background)

BERLIN/HAMBURG, April 11 (Reuters) - Volkswagen will give labour leaders a management board seat as part of a broad agreement to win approval for Herbert Diess as the German carmaker's new chief executive, sources said on Wednesday.

Europe's largest automotive group is poised to replace group chief executive Matthias Mueller this week with Diess, a cost-cutter hired in 2015 from BMW as it seeks fresh impetus for its recovery from an emissions scandal.

Volkswagen's (VW) supervisory board will on Friday replace personnel chief Karlheinz Blessing with Gunnar Kilian, managing director of the carmaker's works council who works directly under labour boss Bernd Osterloh, four sources close to VW told Reuters.

VW and the works council declined comment. Kilian's appointment, first reported by German magazine Der Spiegel, would give VW's labour representatives a direct say on cost cutting and strategy debates at executive board level.

Senior works council members last year had their salaries cut and bonuses suspended after public prosecutors investigated alleged overpayments at the carmaker, a move that labour leaders are blaming on Blessing, one source said.

Removing Blessing, who also oversees VW's slow-moving efforts to establish a new corporate culture, will be part of a broader reshuffle that could also affect other senior executives, another source said.

Diess is due to outline the group's new leadership structure in front of the supervisory board on Friday, two sources said.

The replacement of CEO Mueller with Diess has been planned for months and group procurement chief Francisco Garcia Sanz, is also due to be ousted, Germany's Bild newspaper reported earlier on Wednesday.

The 59-year-old Diess looks set to retain his responsibilities as head of the core VW passenger car brand if he becomes the group's next CEO, the second source said. (Reporting by Andreas Cremer and Jan Schwartz Editing by Edward Taylor/Keith Weir)