In a meeting hall at Mercedes-Benz’s flagship plant in Sindelfingen, workers were told something management had been circling for months: producing cars in Germany has become too expensive.
Mercedes-Benz is weighing roughly 800 million euros, about $911 million, in labor-cost reductions at its German operations, according to a report Thursday in the business outlet WirtschaftsWoche that cited three people familiar with the matter. How the savings would be achieved has not been settled.
The options on the table reach into the details of a German worker’s pay packet. Management has discussed increasing working hours without additional pay, adjusting holiday and Christmas bonuses, and eliminating certain special payments, according to the report. Mercedes declined to comment, describing the discussions as speculation.
Production chief Michael Schiebe delivered the message at a works meeting in Sindelfingen, telling employees the company must cut costs in Germany or close two plants, according to the report. He did not name the facilities or set a timetable, but the plants in question are understood to be a vehicle assembly site and a powertrain plant.
The working-hours proposal cuts against one of German manufacturing’s most guarded agreements. Mercedes workers’ collective bargain with the IG Metall union sets a 35-hour week, and management is reported to be pushing toward 40 hours with no corresponding pay increase.
The pressure has a geography. Mercedes has told employees that its Kecskemét vehicle plant in Hungary runs at roughly 70 percent lower cost than its German sites, according to the report. That gap is the argument behind every line item in the savings plan.
Mercedes has already begun to move. The company delayed a staff bonus worth 18.4 percent of a month’s pay, according to German media, and has tied further measures to productivity gains. The 800-million-euro target is the umbrella over those smaller steps.
The cost drive is part of a broader effort. Mercedes has warned that earnings are under pressure from weak demand in China, once its most profitable market, and from the transition to electric vehicles, which are costlier to build and sell at lower margins than the combustion cars they replace.
The talks place Mercedes in a familiar position for Germany’s auto industry. Volkswagen is pursuing what analysts describe as the most far-reaching overhaul in its history, and BMW is also trimming costs. The shared problem is a combination of high domestic labor costs, soft demand for electric vehicles and intensifying competition from Chinese manufacturers that can undercut on price.
German labor is among the most expensive in the world for manufacturers, and the country’s automakers have spent several years trying to reconcile their wage structures with a market that no longer supports the volumes and margins of the past decade. Executives across the industry have warned that the shift is structural, not cyclical.
The negotiations will play out under Germany’s system of co-determination, which gives workers’ councils a formal voice in decisions about plants and jobs. That structure means Mercedes cannot simply impose the changes; it must trade for them. The guarantees employees are demanding, on jobs and on future model assignments, are the currency of that trade.
Labor’s response has been to push for commitments through 2035 on jobs and on new technology projects being assigned to German plants, according to German media. If the two sides cannot agree, the vehicle assembly plant and the powertrain site hang in the balance.
The backdrop is a competitiveness debate that has gripped German industry since energy costs spiked after Russia’s invasion of Ukraine. Manufacturers have argued that Germany’s wage levels, energy prices and regulatory burden together make domestic production uncompetitive, and some have begun shifting capacity to lower-cost sites in Eastern Europe and beyond.
Labor leaders have pushed back, arguing that the workforce has already absorbed earlier rounds of savings and that squeezing hours and bonuses will not fix a demand problem. The union has signaled it will resist any move to lengthen the working week without compensation, setting up a direct confrontation over a provision that has defined German manufacturing since the 1990s.
Mercedes has not put a public number on the plant-level savings, and the company has left itself room by declining to confirm details. But the threat of closure, once made in a works meeting, is difficult to walk back, and it has raised the stakes for both sides ahead of the next round of talks.
The timing matters as much as the amount. Mercedes is pressing for the changes while orders for its electric models remain uneven and while rivals in China continue to gain share in the segments that once funded German plants. Analysts said the company’s willingness to raise the possibility of plant closures signals how much of its cost base it now considers negotiable.
For Mercedes, the arithmetic is simple to state and hard to negotiate. Keeping production in Germany preserves a workforce and a brand heritage, but only if the cost base falls far enough to make the plants competitive. The company has told its workers which way the numbers point. The talks will decide how far it gets.
