Mercedes-Benz has announced it will halt all further investment at its German sites and is now weighing possible plant closures, a move that underlines the mounting pressure facing Germany's automotive sector. Board member Michael Schiebe said in an interview posted on the company's intranet and sent to AFP that the executive board had jointly decided to stop all investment in German locations after talks with staff representatives failed to produce a deal. He said management was forced to examine which German sites would have to close if the cost structure could not be changed, while stressing that it still hoped for a breakthrough and wanted future vehicle generations built in Germany.
The company's difficulties follow a sharp reversal in its profit outlook. Last month Mercedes-Benz cut its profit forecast to 5.8 billion euros ($6.5 billion), on a par with 2025, after previously expecting an increase of at least 15 per cent. Like BMW and Volkswagen, which have also cut guidance, Mercedes has been hit by sluggish demand and cut-throat competition from Chinese rivals such as BYD and Xiaomi. According to Euronews, the company says an hour of labour at German plants can cost up to five times as much as at sites in Eastern Europe.S1S2
The dispute centres on costs. The powerful IG Metall union is demanding a five per cent pay rise, which board member Britta Seeger called totally excessive, arguing it would further raise already high German labour costs. The company wants a productivity offensive that includes longer working hours without extra pay, and proposals under discussion also reportedly include cuts to special payments such as profit sharing, holiday bonuses and Christmas bonuses. Those demands have already triggered protests among employees.S1S2
Reports name specific sites that could be affected. Schiebe had earlier said that if cost reductions failed, two German plants could close: one vehicle assembly plant and one powertrain plant. Euronews, citing zeit.de, lists assembly plants in Sindelfingen, Rastatt and Bremen, and powertrain sites including Stuttgart-Untertürkheim, Affalterbach, Berlin, Hamburg and Kamenz as well as locations in Thuringia, though it is not yet known which plants may be hit.S2
Analyst Ferdinand Dudenhoeffer described the announcement as no surprise, given the company's repeated warnings, and said Germany's car industry is in its biggest crisis since its inception. He warned that without a fundamental realignment of costs in Germany, the automotive industry there would simply die out. Volkswagen and Audi have also announced extensive savings programmes and job cuts, and Volkswagen plans to have cut 120,000 jobs globally by the end of the decade.S1S2
