Mercedes halts further investment in Germany, weighs plant closures

Automaker Mercedes-Benz has halted further investment in its German sites and is examining possible plant closures amid stalled negotiations with employee representatives over labor costs, German business daily Handelsblatt reported.

The decision was outlined in an interview with production chief Michael Schiebe and labor director Britta Seeger published on the company's intranet Thursday, according to the newspaper.

Schiebe said the board jointly decided to suspend further investment because current cost structures prevented the company from investing in Germany and intensive discussions had failed to produce a path toward agreement.

The automaker is negotiating cost reductions with employee representatives, including proposals for longer working hours without additional pay, Handelsblatt reported. The IG Metall union opposes the proposed cuts.

Seeger said the company was now examining in detail which German locations it could still afford, adding that plant closures would have to be considered more concretely despite management's desire to avoid them.

Schiebe warned that, without changes to the cost structure, production of successor models would take place exclusively abroad, according to WELT, which also obtained the internal interview.

He said decisions on the next generation of vehicles were being made now because of the lead times required to prepare production.

However, Schiebe emphasized that Mercedes remained committed to its German roots and wanted future vehicle generations to continue being manufactured at its domestic sites.

The remarks signal an escalation in the dispute with employee representatives, with potential closures still under review.

The investment freeze comes as the automaker faces weakening profitability and falling sales in China.

The car division's adjusted return on sales fell to 2.5% in the third quarter from 4.8% a year earlier, reflecting weaker business in China and spending on new products.

Deliveries in China dropped 31% to 86,800 vehicles.

Mercedes also lowered its full-year 2026 return-on-sales forecast for the car division to 2%-3%, from 3%-5%.

CEO Ola Kallenius announced at the end of October that the company would reopen its voluntary severance program in Germany in December as part of efforts to further reduce fixed costs.