Mercedes-Benz halts investment in Germany, warns of plant closures

Mercedes-Benz has halted all investment in Germany and is considering closing plants, signaling the struggles faced by the country's automotive industry. The German carmaker, like its peers, has suffered from intense competition in China and elevated costs. Last month, the company reduced its profit expectations for the year to match 2025 levels, down 15 percent from previous forecasts.

Executives from the company's board, despite numerous discussions, have hit a wall in negotiations with unions over cost reductions. The powerful IG Metall union is seeking a 5 percent wage increase, a move the company deems "totally excessive" as labor costs are already excessively high compared to international benchmarks. The company is now experimenting with boosting work hours without additional pay, but those talks have also stalled.

Analysts warn that this development marks the automotive industry's most severe crisis since its inception in Germany. Mercedes-Benz' announcement reflects the dire state of the industry in the country, with no fundamental adjustments to its cost structure in sight. Volkswagen, too, is facing a massive restructuring effort to cut 120,000 jobs globally by 2030, the largest in automotive history.