Mercedes-Benz freezes German investment, weighs closing two plants

Mercedes-Benz has stopped all additional investment in its German plants and will now examine which sites it keeps at all, after cost-cutting talks with labor stalled — with one assembly plant and one component plant potentially on the block.

The decision is formal. On November 12, board members said in an intranet interview that the company's board has decided to suspend every further investment in German operations, according to a report carried by the internal company bulletin. The move follows months of negotiations over cost reduction that produced no breakthrough.

What did management actually say?

HR Director Britta Seeger said the company discussed cost-cutting measures intensively but found no path to a solution, and it now has no choice but to review which plants to keep plant by plant. Management says it aims to avoid closing German factories. But it has already warned that without a cost agreement, it could shut one assembly plant and one components plant.

Production Director Michael Schiebe claimed German labor-hour costs run up to five times higher than at the company's Central European plants. He signaled that without improved cost structures, all future next-generation models could be produced abroad.

CEO Ola Källenius, the same day, argued German labor costs must come down to US levels. He framed it as: cutting costs from 100 to 80 is achievable, urging German sites to restore competitiveness.

How big is the German footprint at risk?

Mercedes operates three vehicle assembly plants in Germany plus seven component plants making engines and batteries. It has pushed to cut German capacity and costs together while leaning on overseas sites such as the Kecskemét plant in Hungary.

The backdrop is pressure from three directions:

• Weakening demand in China, its largest market, where preference for German-made luxury cars has faded
• Competition from local Chinese automakers
• US auto tariffs and price pressure

The company runs a program to cut production costs 10% by 2027 and save €5 billion in total. Since last year it has tried to reduce labor costs, but the union dispute stretches beyond wages to collective-bargaining items — bonuses, vacation pay, Christmas payments.

What is IG Metall doing?

IG Metall, Germany's largest industrial union, decided on November 12 at executive-board level to authorize 24-hour warning strikes across the metal and electrical industries. That is authorization, not a confirmed national strike — timing and whether strikes happen depend on member votes at each plant.

The union demands a 5% wage increase for roughly 3.7 million workers. Employers have offered a one-off payment of several hundred euros plus a 1.3% wage rise in 2028. The gap remains wide.

Volkswagen is already fighting its own battle over restructuring German production sites and labor relations. The tension over German auto production bases and jobs has now spread to Mercedes.

What to watch next

Management's stated goal is avoiding closures — treat that as an intention, not a commitment. The concrete markers: whether plant-by-plant reviews name specific sites, whether the union's plant-level votes trigger actual warning strikes, and whether the 5% versus 1.3% wage gap narrows before the 2027 cost target hardens into site decisions.