Mercedes-Benz Halts German Investments, Mulls Plant Closures Amid Rising Costs and Sales Pressure

Mercedes-Benz has announced a halt to all new investments in its German operations and is seriously considering closing some manufacturing plants due to high production and labor costs and weakening sales performance. Production Chief Michael Schiebe stated that despite ongoing negotiations with employee representatives since summer, a clear path to cost reduction has not emerged, prompting the board’s decision to cease further investments in Germany.

The company operates several assembly and powertrain plants in Germany, including assembly sites in Sindelfingen, Rastatt, and Bremen and powertrain plants in Stuttgart-Untertürkheim, Affalterbach, and others. Schiebe explained that production costs in Germany can be up to five times higher than in Eastern Europe, with similar disparities in administrative expenses. Management has warned that if necessary cost reductions are not achieved, two plants—a German assembly plant and a powertrain plant—could face closure.

Mercedes-Benz’s HR Chief Britta Seeger acknowledged the need for a socially viable restructuring package but predicted that reaching a quick agreement was unlikely. She emphasized the company’s responsibility to critically assess which sites in Germany remain economically sustainable, although all parties prefer to avoid plant closures.

These developments come amid broader challenges for Mercedes, including declining sales, profit drops, and external pressures such as tariffs imposed by the United States and diminished business from China. CEO Ola Källenius has faced increasing pressure due to these factors, which some observers describe as economic coercion stemming from management missteps.

Adding to industry-wide challenges, rival Volkswagen recently announced a reevaluation of its investments, halting its "Gamechanger" project aimed at modernizing auto production.

Negotiations continue between Mercedes management and labor unions like IG Metall, with the company seeking concessions such as employees working more hours per week at the same pay. The negotiations remain tense as the automaker grapples with balancing labor costs against its competitive position in the global market.