Mercedes-Benz freezes investment in Germany as union threatens widespread automotive strikes
The labour dispute in Germany’s automotive industry has entered a new phase. Mercedes-Benz has halted additional investment in its German plants and is considering closing production sites because management has been unable to agree on cost reductions with employee representatives. Meanwhile, the IG Metall union has authorised 24-hour warning strikes that could also hit Audi and Mercedes-Benz plants. The dispute is no longer just about pay, but about Germany’s competitiveness as a car-producing country.
Mercedes-Benz freezes investment and considers plant closures
Mercedes-Benz production chief Michael Schiebe confirmed in an interview published on the company’s intranet that the board had decided to halt all additional investment in German production sites.
The decision follows months of unsuccessful negotiations with the works council and IG Metall. Mercedes wants to reduce its annual labour costs in Germany by approximately €800 million.
Management’s proposal includes extending the working week from 35 to 40 hours without increasing basic pay. The company also wants to cut bonuses and other employee benefits.
Adding five hours while keeping monthly pay unchanged would mean a 12.5% reduction in the effective hourly rate.
Human resources chief Britta Seeger warned that, without an agreement, Mercedes would have to assess the future of its German plants more thoroughly. Management wants to avoid closures but no longer rules them out.
Schiebe had previously raised the possibility of closing one vehicle assembly plant and one powertrain component production site. The company has not yet made any specific closure decisions.
Audi and Mercedes-Benz have already experienced strikes
Meanwhile, the collective bargaining dispute across Germany’s metalworking and electrical industries is escalating.
IG Metall announced on 12 November that it was authorising 24-hour warning strikes, rather than limiting stoppages to a few hours as before. According to the union, 464,000 people have already taken part in stoppages since the beginning of November.
The dispute affects approximately 3.7 million workers.
The union is demanding a 5% pay rise over 12 months and stronger job security guarantees. Employers, however, are offering a 1.3% pay rise only from July 2028.
Under the current offer, this means workers would have to wait almost another two years for a permanent pay increase.
Warning strikes have already affected several major car plants.
Approximately 15,000 people took part in a stoppage at Audi’s Ingolstadt plant and associated companies on 9 November. In Neckarsulm, 6,500 workers gathered to protest.
At Mercedes-Benz’s Sindelfingen plant, more than 4,000 people took part in overnight stoppages on 6 November, while approximately 7,500 joined a daytime protest.
The exact locations and timing of the new 24-hour strikes are not yet clear.
Union offers concessions in exchange for investment
IG Metall does not entirely rule out changes to working conditions.
During negotiations, the union offered the possibility of temporary exemptions from collective agreements if companies made verifiable commitments in return to invest in new products, retain production sites and protect jobs.
This marks an important difference from what Mercedes-Benz management wants.
The manufacturer wants to reduce costs first to remain competitive. The union demands that employee concessions lead to concrete investment and employment guarantees.
Both sides’ positions have an economic rationale. German plants must compete with significantly cheaper production sites in Eastern Europe and Asia. For workers, however, a longer working week for the same pay would mean a marked deterioration in their existing working conditions.
The question is who bears the cost of restructuring the automotive industry and what guarantees workers receive in return.
Germany’s production costs are becoming a growing problem
There is more behind Mercedes-Benz’s investment freeze than another pay dispute.
According to the company’s management, manufacturing labour costs in Germany can be up to five times those at some Eastern European plants.
The manufacturer is also under pressure from US import tariffs, weakening demand in China and increasingly strong competition from domestic Chinese car brands.
These factors affect the entire German automotive industry.
Volkswagen is planning extensive cuts to jobs and production capacity. Component manufacturer Schaeffler recently announced 3,460 job cuts and the closure of five European plants, four of them in Germany.
The future of Audi’s Neckarsulm plant also raises questions. If the company cannot find a new, competitive activity for the site, car production there could end after 2033.
Can cheaper labour save Germany’s automotive industry?
Labour costs are an important competitive factor, but reducing them will not solve all the problems facing Germany’s automotive industry.
European manufacturers must also invest in battery technology, software, electric drivetrains and new production processes. In many segments, Chinese competitors can develop new models faster and offer them at lower prices.
A prolonged investment freeze could therefore prove a double-edged sword for Mercedes-Benz.
In the short term, it increases pressure on the union and helps avoid additional cost commitments. In the longer term, however, plants without investment could fall behind technologically, making their closure even more likely.
The same problem affects Audi. A production site’s future depends on whether the group entrusts it with manufacturing next-generation models or components.
In the automotive industry, a plant’s future is no longer determined solely by its current production costs, but also by whether the company considers the site necessary to its strategy for the coming decades.
Europe’s automotive industry faces a difficult choice
The problems facing German carmakers affect European industry as a whole.
If Mercedes-Benz and other manufacturers direct a larger share of new investment to lower-cost countries, this could strengthen manufacturing in some European regions while weakening Germany’s established position as an automotive hub.
Relocating production could also affect supply chains in parts of Europe, where companies manufacture components for the automotive industry.
The direct impact will depend on which plants and models ultimately miss out on investment.
Mercedes-Benz’s decision and IG Metall’s strike threat show that the struggle in Germany’s automotive industry is about far more than the next pay agreement.
Manufacturers want to reduce costs to remain competitive. Workers want reassurance that their concessions will not end in plant closures a few years later anyway.
A reasonable compromise would require linking cost reductions to investment, productivity improvements and new models. Without that, Germany could gain cheaper labour but lose part of the industry that would need it.
