Mercedes-Benz is escalating its confrontation with German unions by freezing further investment in its domestic factories until an agreement on labor-cost reductions is reached.
The move raises the prospect of factory closures and the transfer of future models abroad, despite the manufacturer’s commitment to protecting German employment until 2034.
The decision was communicated to employees on Thursday, November 12, in an internal interview with production chief Michael Schiebe and board member Britta Seeger. The communication was obtained independently by Reuters, Handelsblatt, and several German broadcasters.
“We have jointly decided on the executive board to halt all further investments in German locations,” Schiebe declared, arguing that current production costs make new investments economically unviable.
Two factories under threat
The announcement marks a further escalation of a dispute already reported by Newmobility.news in September, when Schiebe warned that Mercedes might have to close one German vehicle assembly plant and one powertrain factory unless labor costs were reduced.
Now, management says these possibilities must be examined in greater detail. “We all want to avoid plant closures at all costs,” Seeger acknowledged, but added that the company could no longer exclude that option.
No specific factories have been officially designated for closure. Mercedes operates major assembly facilities in Sindelfingen, Rastatt, and Bremen, alongside several German engine and component plants.
Working longer for the same pay
At the heart of the conflict is management’s demand for a substantial increase in productivity. Mercedes wants employees to work longer hours without corresponding salary increases, potentially replacing the traditional 35-hour working week with a 40-hour one.
That would mean more than 14% additional working time for the same pay. Management is also targeting bonuses and supplementary benefits, seeking approximately €800 million in annual labor-cost savings. According to Schiebe, an hour of production labor in Germany can cost up to five times as much as in Eastern European factories.
The powerful IG Metall union opposes abandoning the 35-hour week, one of its historic achievements. Negotiations have been underway for months without a breakthrough.
The irony is that Mercedes agreed with employee representatives in 2025 to extend employment protection in Germany until the end of 2034. That commitment does not necessarily guarantee the future of every production site.
China adds to the pressure
Mercedes’ difficulties extend well beyond German labor costs. The manufacturer is struggling with declining sales in China, where domestic competitors are challenging its traditional dominance in the premium market.
US tariffs and pricing pressure have further undermined profitability. In the third quarter of 2026, the Mercedes-Benz Cars division reported an adjusted operating margin of just 2.5%.
Nevertheless, the company remains financially solid, with approximately €31 billion in industrial net liquidity. Its electric-car sales also increased strongly during the quarter.
The investment freeze is therefore less a question of immediate financial survival than of where Mercedes intends to manufacture its next generation of vehicles.
For German workers, that distinction may offer little comfort. The message from Stuttgart is increasingly clear: unless production becomes cheaper, future Mercedes models could be built elsewhere.
