Mercedes Halts German Investments Amid Cost Gap of Up to Five Times
Key Facts
Mercedes-Benz management has decided to temporarily halt additional investment at its German sites, linking the move to cost-cutting talks with employee representatives. Production chief Michael Schiebe said in an internal interview reviewed by Handelsblatt: "We jointly decided at the board level to halt all additional investment at German sites." The newspaper published details of the decision on 12 November 2026. The freeze follows months of talks that have brought the two sides no closer. Handelsblatt quoted the company as saying that "there has been no convergence so far" in the negotiations. The decision puts investment at German sites at the center of the mutual pressure over production costs and working conditions.
The issue extends beyond halting additional spending to a review of whether the sites can remain viable within the company's cost structure. Human resources chief Britta Seeger said Mercedes would examine in detail which sites it could afford to operate in Germany. She added that the option of closing plants would be considered more seriously. The company had previously announced the possibility of closing a German assembly plant and a powertrain components plant if costs do not fall. The threat puts two plants within the scope of the review, without amounting to an announcement that they will close. It follows an earlier warning covered by EL7 on 22 September 2026 about the possible closure of two German plants if costs are not reduced.
Labor costs are one of the main points of contention. Germany's dpa news agency, in a report published by t-online, said the cost of an hour of production work in Germany can in some cases be five times that at sites in Eastern Europe. In September, Reuters reported that the company was targeting a reduction of 800 million euros in labor costs in Germany. Options covered in reports included increasing working hours without additional pay, as well as adjusting bonuses or eliminating special payments. Reuters said management had discussed raising the workweek from 35 hours to 40 hours without additional wage compensation. The proposals reflect the breadth of disagreement over how the company and employees will share the cost of restructuring production. According to Handelsblatt, the talks remain without convergence after months of negotiations.
The review of German sites coincides with operating pressures in the group's automotive business. Mercedes-Benz sold 407,232 cars in the third quarter of 2026, down 8% from 441,453 cars in the same period of 2025. The company attributed the decline mainly to difficult market conditions and intense competition in China. On 27 October, the company cut its forecast for the adjusted return on sales of its cars in 2026 to a range of 2%–3%, from 3%–5% previously. It linked the revision to tougher conditions in China and higher costs expected in the fourth quarter. After announcing the forecast cut that day, the stock fell as much as 5.5% and was down about 4% at 09:55 GMT, according to Reuters.
Group data point to continued spending and cost reductions alongside the review of production sites. Mercedes-Benz Cars' research and development expenses and investment in property, plants and equipment fell 11% in the first nine months of 2026 compared with the corresponding period, which the company described as an investment peak. The group said the reduction followed a roughly 25% decline in fixed costs since 2019. Meanwhile, industrial net liquidity stood at 31.0 billion euros on 30 September 2026, compared with 32.2 billion euros at the end of 2025. The company said liquidity remained close to the year-end level. These figures provide financial context for the investment freeze as the company continues to review its spending and operating burdens.
Mercedes is due to reopen its voluntary redundancy program for employees in indirect roles in Germany starting in December 2026, according to the company's third-quarter disclosure. The program adds a route to reducing indirect jobs to negotiations over production costs and sites. But the start date does not specify how many jobs will be affected, nor does it in itself represent a decision to close any plant. The review of German sites remains tied to whether the company and employees can reach agreement on cost reductions, according to published statements. The chief executive warned on 11 November that China's auto market was deteriorating more than expected, according to a report published by EL7. These developments bring together competitive pressures in China and the company's efforts to address production costs in Germany.