Mercedes-Benz Halts All New Investment At German Plants

Mercedes-Benz has stopped all new investment at its German plants and is now openly considering closing some sites, as a standoff with unions over labour costs deepens. The decision, confirmed in a memo to workers, marks one of the sharpest escalations yet in Germany's auto industry crisis.

As per Reuters report, Production chief Michael Schiebe said the executive board had "jointly decided to halt all further investments in our German locations." The company said it could not reach an agreement with its works council and union representatives on cutting labour costs.

Why Now

Mercedes-Benz has been under pressure for months over the high cost of manufacturing cars in Germany. Schiebe had already warned staff in September that two German plants could close if there was no progress on cost savings.

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Management board member Britta Seeger said in the memo that while the company wanted to avoid plant closures at all costs, it now had to examine that option in more detail.

What The Union Says

Talks with IG Metall, Germany's largest union, are still ongoing. The union is currently demanding a pay rise of five per cent in wage negotiations with the company.

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Volkswagen begins its own negotiations with the union on November 24, with strikes looming around the turn of the year over plans that could result in up to 100,000 job losses and the closure of as many as four German plants.

What The Industry Says

Auto analyst Ferdi Dudenhoeffer told Reuters the news was hardly a surprise, saying Mercedes had spent months stressing how difficult its German situation was. He said the industry's future was in the balance unless its cost structures were overhauled.

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Reuters also pointed to the spread of the crisis through the supply chain, noting that Schaeffler said last week it would cut 3,460 jobs and close five European sites, four of them in Germany, citing weak demand for combustion-engine vehicles.