Mercedes halts further investment in Germany

Mercedes-Benz has ceased further investment in its German manufacturing facilities, according to a report by Handelsblatt. The decision follows a slump in profitability and declining sales in China. The automaker is currently negotiating with employee representatives regarding labor costs, including suggestions for longer work hours without extra pay.

However, the Industrial Union IG Metall has raised objections to these proposed cutbacks. Production chief Michael Schiebe and labor director Britta Seeger revealed in an internal company publication that the board has jointly decided to suspend further investment due to unviable cost structures. They are now investigating potential German locations for continued operations, with plant closures potentially on the table.

Mercedes-Benz aims to avoid closures but acknowledges the necessity if cost structures remain problematic. The company's decision comes as it faces weakened profitability and falling sales in China, where adjusted return on sales for the car division dropped to 2.5% in Q3 2021 from 4.8% a year earlier. Deliveries in China fell 31% to 86,800 vehicles.

In response to the challenges, Mercedes lowered its full-year 2026 return-on-sales forecast for the car division to 2-3%, down from the previous 3-5% estimate. CEO Ola Kallenius announced the resumption of a voluntary severance program in Germany in December as part of efforts to further cut fixed costs.