Mercedes-Benz Freezes All German Plant Investment

Mercedes-Benz is halting all investment in its German plants and is exploring the possible closure of sites in a bid to tackle the high cost of manufacturing cars in the country, Reuters reported on Thursday, citing a memo to workers seen by the news agency. According to Reuters, the move marks the latest escalation in the German auto sector's crisis, which has already prompted Volkswagen's biggest-ever restructuring, and puts tens of thousands of jobs at risk in the country's most important industry.

1. Decision taken as the brand could not reach agreement on cutting labour costs.
2. Lack of cost savings could cause closure of two German facilities.
3. Chinese rivals' Europe market penetration prompted protective measures.

Mercedes-Benz considering closure of German facilities

The news agency said Mercedes took the decision because it could not reach an agreement with its works council and union representatives on cutting labour costs, citing an interview with executive board members shared on the company's intranet. Production chief Michael Schiebe said management had jointly decided to halt all further investment in its German locations, Reuters reported.

Reuters noted that Schiebe had warned staff in September that two German plants could close if there was no progress on cost savings. 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, according to Reuters.

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. The talks with IG Metall, Germany's largest union, are continuing, Reuters said. 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, the agency reported.

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. Citing consultancy Roland Berger, Reuters said at least 2 lakh German automotive jobs could be lost by 2030 amid fierce competition and falling market share and volumes in China, once a key profit driver for German carmakers.

Chinese rivals are now gaining market share in Europe, Reuters added, prompting executives to call for protectionist measures from Brussels. Reuters also reported that the chief executive of Stellantis warned on Thursday that costs would keep rising over at least the next year.