Conflict with works council
Mercedes-Benz reviews German plant closures and freezes future investments
Mercedes-Benz is stepping up pressure on employee representatives and trade union IG Metall as negotiations over labour costs at its German plants remain deadlocked. The carmaker is considering closing two production facilities and has put future investments on hold. However, projects already underway will continue.
Mercedes-Benz is intensifying its efforts to reduce manufacturing costs in Germany, with potential plant closures now under more detailed consideration. In an internal interview published on the company's intranet, HR board member Britta Seeger said the carmaker was assessing which of its German sites would remain economically viable under the current cost structure.
The move follows unsuccessful negotiations with the works council and IG Metall over measures to improve the competitiveness of Mercedes-Benz's German operations. While the company continues to seek a socially acceptable agreement, a breakthrough does not appear imminent.
"We all want to avoid plant closures at all costs. Unfortunately, however, we now have to pursue this option more concretely," Seeger said.
Mercedes-Benz confirmed to AMS, that the closure of one vehicle assembly plant and one powertrain facility in Germany remains a possibility if labour costs cannot be reduced. The company declined to identify which locations could be affected.
Investment freeze excludes projects already underway
Mercedes-Benz is also putting further investments in its German manufacturing network on hold. According to production board member Michael Schiebe, the management board has jointly decided to suspend future investment commitments at German sites, arguing that the current cost structure makes new projects economically unviable.
However, Mercedes-Benz clarified to AMS that the decision does not affect investments already underway. Instead, it primarily concerns future vehicle programmes and production investments planned for the coming years.
Automotive manufacturers typically need to commit funding several years ahead of new model launches. According to Mercedes-Benz, investments originally earmarked for German facilities could now be reassessed and potentially allocated to other locations unless an agreement on cost reductions is reached.
One major project that will continue is the new paint shop under construction at the Sindelfingen plant. Mercedes-Benz confirmed that the billion-euro investment, which is already underway, will proceed as planned. Future projects that have yet to enter the implementation phase, however, are subject to review.
The company points to significant labour cost differences between its manufacturing locations. According to Mercedes-Benz, the cost of one production hour in Germany can be up to five times higher than at sites in Eastern Europe. Similar disparities reportedly exist in administrative functions.
Schiebe had already raised the possibility of closing two German facilities several weeks earlier if the company failed to achieve sufficient cost reductions. Mercedes-Benz currently operates vehicle assembly plants in Sindelfingen, Rastatt and Bremen, alongside powertrain and component manufacturing facilities including Stuttgart-Untertürkheim, Berlin and Hamburg.
IG Metall and works council reject closure plans
The announcements have prompted strong criticism from employee representatives, who accuse Mercedes-Benz management of undermining confidence in its German manufacturing operations.
Ergun Lümali, chairman of the General Works Council, criticised the prospect of shifting production capacity to Eastern Europe rather than investing in existing German facilities.
"We need board members who believe in Germany as an industrial location rather than talking it down whenever a crisis arises. We firmly reject plant closures and know how to defend ourselves," Lümali said.
IG Metall has also rejected the prospect of factory closures. Barbara Resch, the union's regional director, called on Mercedes-Benz to provide greater transparency about its plans and commit to future vehicle programmes and investments at its German plants.
She criticised management's approach of freezing investments while simultaneously demanding longer working hours and reductions in employee benefits.
The dispute over labour costs has been escalating for some time. Mercedes-Benz previously proposed increasing working hours without additional pay as a way of improving productivity and reducing hourly labour costs. The proposal triggered protests among employees.
Mercedes-Benz declined to specify its exact cost-reduction targets when contacted by AMS, citing ongoing negotiations with employee representatives. The company also did not provide a firm deadline for reaching an agreement.
The dispute comes as Mercedes-Benz continues to face pressure from declining vehicle sales and weaker profitability. With future investments under review and potential plant closures increasingly part of the negotiations, the outcome could have significant implications for the carmaker's German manufacturing footprint.
