Mercedes-Benz is suspending all investments in its German plants and considering possible site closures to address the country’s high vehicle production costs, Reuters reported on Thursday, citing an internal memo to employees. The move adds to the growing crisis in Germany’s automotive industry. The decision comes after talks between company management, the works council, and union representatives failed to reach an agreement on reducing labor costs.
In September, Mercedes-Benz production chief Michael Schiebe warned that two German plants could face closure if negotiations failed to progress. He said management had already decided to stop all additional investment in the company’s German sites.
The company continues to negotiate with IG Metall, Germany’s largest industrial union. Schiebe stressed that decisions on future production locations cannot be delayed.
The tough stance is intended to put pressure on ongoing negotiations. According to Handelsblatt, citing people familiar with the discussions, employees are willing to consider concessions only if management provides firm guarantees on future jobs and plant utilization in Germany. Management, meanwhile, has linked its commitments to German production sites with lower labor costs.
The investment freeze comes after Mercedes-Benz released its latest financial results late last month and lowered its profit forecast for the 2026 financial year. The company pointed to a tougher market in China, higher raw material costs, and additional expenses related to product lifecycle measures in the fourth quarter. Meanwhile, Schaeffler announced last week that it would cut 3,460 jobs and shut down five European facilities. The company cited weak demand for vehicles with internal combustion engines.
The report attributes the pressure to weaker business in China, U.S. tariffs, and the impact of the Iran war. Management decisions have also contributed to the company’s difficulties. Mercedes, which is listed on Germany’s DAX index, warned of lower profits several weeks ago.
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