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German automaker Mercedes-Benz has suspended further investment at its domestic production sites and is considering factory closures amid stalled negotiations with employee representatives over labor costs, German business daily Handelsblatt reported.
The decision was disclosed in an internal 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 management board had jointly decided to halt additional investment because the company's current cost structure made further spending at German facilities economically unviable.
He said intensive negotiations with employee representatives had failed to produce a path toward an agreement.
Mercedes-Benz is seeking to reduce labor expenses, including through proposals to extend working hours without additional compensation, according to Handelsblatt.
Germany's IG Metall trade union has opposed the proposed measures.
Seeger said the company was reviewing which German production locations it could continue operating under its existing cost structure.
She acknowledged that plant closures would now need to be considered more seriously, although management remained reluctant to take such measures.
Schiebe also warned that production of successor vehicle models could move entirely abroad unless the company achieved changes to its cost structure, according to German newspaper WELT, which separately obtained the internal interview.
He said decisions about where to manufacture the next generation of vehicles were being made now because of the lengthy preparations required for production.
Despite the warning, Schiebe emphasized that Mercedes-Benz remained committed to its German industrial roots and wanted future vehicle generations to continue being manufactured domestically.
No final decision on factory closures has been announced.
The investment freeze comes as Mercedes-Benz faces weakening profitability and declining sales in China, one of its key automotive markets.
The adjusted return on sales of its passenger car division fell to 2.5% in the third quarter, down from 4.8% a year earlier, reflecting weaker business in China and spending on new vehicle development.
Mercedes-Benz deliveries in China plunged 31% to 86,800 vehicles during the quarter.
The automaker also lowered its full-year 2026 adjusted return-on-sales forecast for its passenger car division to between 2% and 3%, down from its previous projection of 3% to 5%.
The deteriorating financial performance has intensified pressure on management to reduce fixed costs and improve the competitiveness of its German manufacturing operations.
At the end of October, CEO Ola Kallenius announced that Mercedes-Benz would reopen its voluntary severance program in Germany in December as part of further cost-cutting efforts.
The latest investment decision marks an escalation in negotiations between management and employee representatives, with the future of some German production facilities now under review.
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