Mercedes freezes all new spending at German plants and weighs factory closures

Mercedes-Benz has frozen all new investments at its German factories and is now evaluating which sites can remain operational amid stalled labour talks, high costs, and a sharp decline in China sales. Production chief Michael Schiebe communicated to staff that the board unanimously decided to cease further investments in German facilities due to current costs making new spending unfeasible.

Labour director Britta Seeger indicated that a swift agreement with the works council and IG Metall seems unlikely, emphasizing the necessity to scrutinize which German locations remain affordable for operations. Discussions over reducing labour costs have stalled for months, with Mercedes requesting longer working hours without additional pay and other productivity measures to enable German plants to compete.

The company's CEO, Ola Källenius, used a cost index to highlight the disparity: Germany at 100, the United States at 80, Hungary at 30, Romania at 20, and China between 10 and 20. Without an agreement, future models may be produced outside Germany. Current ongoing projects will temporarily continue. Falling sales in China have exacerbated the cost issue.

Deliveries there have dropped by approximately 30 percent in recent quarters as luxury demand wanes and local Chinese brands present cheaper electric cars. Mercedes has revised its full-year profit forecast for the cars division to 2-3 percent and initiated a broader savings program. The German automotive industry has already reduced thousands of jobs in the past year, while suppliers like Bosch have cut hours and wages for thousands of workers, and Volkswagen is engaged in its own challenging talks regarding possible plant closures.

Mercedes plants in other European countries, such as Hungary and Spain, are unaffected by the freeze. The company has made it clear that lower-cost European sites remain part of its production strategy. No specific German factory has been named for potential closure; workers at sites like Sindelfingen, Rastatt, Bremen, and various powertrain plants now face months of uncertainty while negotiations persist.

The IG Metall union has rejected Mercedes' demands and intends to proceed with additional warning strikes. Mercedes remains committed to a negotiated resolution, yet the halt in investments reveals the extent to which the company is willing to go if German costs remain elevated.