"Labor Costs Are Too High": Could German Auto Icon End Domestic Production? Mercedes Weighs Plant Closures

Mercedes Considers Closing German Plants... "Labor Costs Five Times Higher Than in Eastern Europe"
Considers Cutting Back Domestic Plants Following Volkswagen
Headwinds from Slumping China Sales and U.S. Auto Tariffs

German automaker Mercedes-Benz (hereinafter Mercedes) said it would begin seriously considering closing plants in Germany. With sales and profitability continuing to deteriorate, the company says it can no longer afford Germany's high labor costs.

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According to German public broadcaster Deutsche Welle (DW) on November 12, Mercedes production board member Michael Schiebe said in a memo on the company's intranet, "The Board of Management has decided to suspend all additional investment at our German sites." He added, "Labor costs in Germany are up to five times higher than in Eastern Europe, making them unaffordable. Unless costs are reduced going forward, we will have to close two plants in Germany."

Britta Seeger, the board member responsible for human resources, also said, "We want to use every means available to avoid closing plants in Germany, but at present we see no way to resolve the situation." She added, "We have no choice but to discuss in specific detail which plants in Germany may have to close." Mercedes operates three vehicle assembly plants and seven component production plants in Germany, including facilities producing engines and batteries.

In September, Mercedes executives said, "Our clear goal is to maintain all our sites in Germany," but added, "If we cannot reach an agreement on cost reductions, we will have to close one assembly plant and one component plant in Germany."

Mercedes is a well-known automotive brand representing Germany, but declining sales and profits in recent years have made operations increasingly difficult. According to DW, sales fell as demand in China weakened significantly. The Chinese market had accounted for more than 30% of Mercedes passenger car sales. Mercedes vehicle sales in China are reported to have fallen by more than 19% this year compared with the previous year. Its electric vehicle lineup, which required substantial investment to convert production lines, also continued to struggle amid intensifying competition from low-cost electric vehicles imported from China.

After Volkswagen Group decided to halt production at two of its 10 plants in Germany, Mercedes has also said it is considering closing some of its German plants, raising concerns that German automakers will continue to shut down plants in their home country. DW noted, "German and European automakers are facing increasingly difficult business conditions as weak sales in China coincide with pressure from U.S. auto tariffs," adding, "Following Volkswagen and Mercedes, Audi and Porsche are also facing similar challenges."

This content was produced with the assistance of AI translation services.