Mercedes halts German investment, warns plants could shut

Mercedes-Benz has slammed the brakes on spending in Germany. In an internal intranet interview published Thursday and first quoted by Handelsblatt, production board member Michael Schiebe said the board had jointly decided to halt all further investment at the company's German sites. Factory closures in Germany and more relocations abroad are now becoming increasingly likely, he warned.

“We have jointly decided in the board to halt all further investments in the German sites,” Schiebe told staff, adding that an hour of production labour in Germany can cost up to five times more than at locations in Eastern Europe. Even the US, a high-wage market, is significantly cheaper than Germany, he said. With vehicle generations needing long lead times, Mercedes says it must decide now where the next models will be built — and that if the cost structure doesn't change, “successor products will then be manufactured exclusively abroad.”

At the heart of the standoff is the 35-hour workweek, which CEO Ola Källenius wants to abolish, along with a push to cut labour costs. Handelsblatt reports the conflict has been simmering since the end of June and has now reached a stage where neither side will make further concessions. Insiders told the paper that employees will only give ground in exchange for reliable commitments on future employment and plant utilisation in Germany, while management ties its own German commitments to lower labour costs.

Mercedes wants German workers to put in longer hours for the same pay, and to eliminate or shrink special payments such as Christmas and holiday bonuses and annual profit-sharing. According to Handelsblatt, management aims to save €800 million a year that way. The board itself also intends to waive parts of its own remuneration.

The pressure is real: sales are sliding, dragged down by a collapsing Chinese business, burdens from US tariffs and the consequences of the Iran war, the report says, with management errors adding to the trouble. The DAX-listed carmaker warned of lower profits a few weeks ago and had already withdrawn its sales and production forecast in the summer. Mercedes builds vehicles in Germany at Sindelfingen near Stuttgart, Bremen and Rastatt, with component plants in Stuttgart-Untertürkheim, Affalterbach, Berlin, Hamburg, Kamenz, Kölleda and Arnstadt.