Mercedes-Benz Group’s labour leaders said they won’t accept German plant closures as their clash with management over costs and working hours escalates ahead of pay negotiations.
The pushback follows a decision by the carmaker to halt further investment at its German sites while talks over lowering labor costs remain deadlocked.
Production chief Michael Schiebe has warned that future models could be assigned to factories abroad and that the company may have to consider shuttering plants if no agreement is reached.
“We firmly reject plant closures and know how to defend ourselves,” Ergun Lümali, head of Mercedes’ general works council and deputy chairman of the supervisory board, said in a statement Friday.
He also criticized management for threatening to shift production to the company’s factory in Hungary rather than investing in innovation at home.
The confrontation comes as Mercedes grapples with a sharp deterioration in earnings. Its once-lucrative Chinese business has been hit by weaker luxury demand and stronger local competitors, while US tariffs and pricing pressure are adding to the strain.
Mercedes recently cut its profit outlook and now expects its cars division to generate an adjusted return on sales of just 2% to 3% this year, far below the double-digit margins management had targeted under Chief Executive Officer Ola Källenius’s luxury strategy.
At the center of the dispute is Germany’s 35-hour week. Mercedes wants employees to work longer without an increase in monthly base pay, arguing that labor costs at its German plants are too high compared with sites in Eastern Europe and the US.
Months of talks with the works council and IG Metall union have yet to produce a compromise.
“It can’t be that the management board wants to stop further investment in German sites while at the same time demanding longer working hours and cuts to benefits,” said Barbara Resch, head of IG Metall in Baden-Württemberg and a member of Mercedes’ supervisory board.
Labor officials have considerable influence over such decisions under Germany’s system of co-determination.
Employee representatives hold half of the 20 seats on Mercedes’ supervisory board, which oversees management and approves important corporate decisions.
Mercedes and its works council also agreed last year to extend a job-security pact known as ZuSi 2035.
The agreement generally rules out compulsory redundancies for covered German employees through the end of 2034 and formed part of a broader package aimed at lowering personnel costs and increasing flexibility.
The tensions are building as Mercedes enters broader pay negotiations with IG Metall, which has sought a 5% wage increase across Germany’s metal and electrical industries.
Management has rejected that demand as excessive given the downturn and has also raised the prospect of examining bonuses and other benefits as part of its push to lower costs.
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