Mercedes-Benz Halts German Investments Amid Labor Disputes, Weighs Factory Closures

Mercedes-Benz has announced a complete halt to all investments in its German production sites amid stalled negotiations with labor representatives over cutting personnel costs. Production Chief Michael Schiebe revealed that the board decided collectively to cease further investments in Germany, citing unsustainable cost structures and a lack of progress in talks.

Human Resources Chief Britta Seeger underscored the urgency for concessions from employees, stating, "We are now forced to concretely and detailed examine which locations we can still afford in Germany." She emphasized that maintaining all German sites is no longer feasible without significant changes. While the company aims to avoid factory closures, Seeger acknowledged that the option must be seriously considered if a resolution is not reached.

The backdrop to these developments includes sharply higher production costs in Germany — reportedly up to five times greater than in Eastern Europe — compounded by a 26% profit decline in the automotive sector in the second quarter. Labor union IG Metall is demanding a 5% wage increase, which Mercedes warns would exacerbate cost challenges. To improve productivity, Mercedes is pushing to extend the workweek from the historic 35 hours to 40 hours without further pay, a proposal strongly opposed by unions viewing it as a red line.

Seeger noted that the original conditions underpinning the 35-hour workweek no longer apply, suggesting cuts to special payments and voluntary benefits are also on the table. Employee protests against these austerity measures have already erupted, with tens of thousands participating.

Schiebe pointed to intense competition from China and unfavorable tariffs as additional market pressures. He indicated that if no cost reductions are secured, closures of two German plants — including a new assembly facility and a powertrain factory — may be unavoidable.

This standoff marks a critical juncture for Mercedes-Benz's German operations, as the company grapples with balancing competitive pressures, cost containment, and labor relations amid uncertain prospects for a negotiated solution.