Mercedes-Benz is facing a major decision over the future of its German manufacturing footprint as the automotive industry continues to change rapidly. The company has warned that one German assembly plant and one German powertrain plant could face closure if structural operating costs cannot be reduced, although management has stated that its clear goal is to maintain all of its German locations. High labour costs, international competition, changing vehicle demand, and excess domestic capacity are all part of the wider situation, while the company continues to examine how its German operations can remain competitive.

The potential closures have also created a significant disagreement between Mercedes-Benz management and employee representatives. Executives are proposing productivity measures that include increasing the standard working week from 35 to 40 hours while paying employees for 35 hours, while the works council has rejected the proposal and put a 30-hour week forward instead. At the same time, Mercedes-Benz is expanding its Kecskemét facility in Hungary, reducing German production capacity, and planning further adjustments to its global manufacturing footprint as it responds to cost differences, market demand, and the transition towards electric vehicles.

1. Mercedes-Benz Warns Two German Plants Could Close

Mercedes-Benz has warned that two of its German manufacturing facilities could face closure if cost conditions do not change. The company has identified one assembly plant and one powertrain plant as potentially affected, although management has not specified which exact locations are under threat. The primary concern is the international competitiveness of German production, with high labour costs identified as a major factor. In an emailed statement to Reuters, Mercedes-Benz reaffirmed its desire to preserve both its German facilities and workforce, but stressed that improved framework conditions and greater productivity are required. Production chief Michael Schiebe delivered the warning during an employee gathering at the 111-year-old Sindelfingen facility, explaining that structural operating expenses across the domestic network would need to be reduced.

Mercedes-Benz Closure Warning:

• Two German plants threatened
• One assembly plant
• One powertrain plant
• Exact sites remain unspecified
• Cost reductions remain essential

Despite the seriousness of the warning, management has made clear that closing facilities is not its preferred objective. Schiebe told employees that the company’s clear goal is to maintain all German locations, but said this requires a joint commitment to rigorous cost-reduction measures. If those targets cannot be achieved through agreement, management has warned that one German assembly plant and one German powertrain plant would have to close. Because Mercedes-Benz has not identified the specific sites, every German location effectively remains part of the wider evaluation. The situation therefore centres on how the company can reduce structural costs while maintaining its domestic manufacturing network and workforce.

2. Assembly and Powertrain Plants Face Different Risks

The two types of facilities mentioned in the closure warning perform different functions within Mercedes-Benz’s manufacturing network. An assembly plant builds complete vehicles from start to finish, while a powertrain facility manufactures important components such as engines, transmissions, and battery systems. Mercedes-Benz has confirmed that one facility of each type could potentially be affected, but it has not named the specific locations. The distinction is important because the closure warning covers both vehicle production and component manufacturing. Germany currently has three major vehicle assembly facilities at Sindelfingen, Rastatt, and Bremen, while powertrain operations include major locations such as Untertürkheim and Hamburg.

German Manufacturing Network:

• Three major assembly sites
• Sindelfingen assembly facility
• Rastatt assembly facility
• Bremen assembly facility
• Untertürkheim powertrain operations

The three German assembly facilities each have an annual production capacity of roughly 300,000 vehicles. Together, Sindelfingen, Rastatt, and Bremen therefore represent approximately 900,000 vehicles of annual assembly capacity. On the powertrain side, Untertürkheim and Hamburg handle engines, transmissions, and advanced battery packs. Michael Häberle, deputy head of the group works council and works council chief at Untertürkheim, has said management is actively considering the potential closure of engine production at the historic Untertürkheim plant. That possibility carries particular significance because the site is more than a component factory and remains home to Mercedes-Benz’s global corporate headquarters.

3. Untertürkheim’s Historic Role Adds Importance

The possible closure of engine production at Untertürkheim has particular significance because of the facility’s long history within Mercedes-Benz. The site is the foundation from which the company originally grew more than a century ago and continues to house the automaker’s official global corporate headquarters. Michael Häberle has revealed that executive leadership is actively weighing the potential closure of engine production there. The discussion comes as Mercedes-Benz examines its German manufacturing footprint and looks at ways to reduce structural costs. The situation also provides an example of how traditional automotive factories can face major changes as manufacturers adjust their operations. Audi’s factory in Brussels, which is currently being converted into logistics warehouses, is mentioned as an example of such a transformation.

Untertürkheim’s Historic Importance:

• More than century-old site
• Company originated from site
• Global headquarters remains there
• Engine production faces uncertainty
• Historic role remains significant

The potential change at Untertürkheim therefore involves more than a straightforward production adjustment. The facility represents an important part of Mercedes-Benz’s industrial history while continuing to operate as a major powertrain location. Its connection to engines, transmissions, and the company’s headquarters gives the site a distinctive position within the German network. At the same time, management is examining how domestic production can be aligned with current cost and capacity conditions. The discussions demonstrate the tension between maintaining established manufacturing infrastructure and adapting operations to changing production requirements.

4. Management Wants a Longer Working Week

Mercedes-Benz management has proposed a specific productivity measure for its German operations as part of what it calls a productivity offensive for Germany. In a formal letter to employees, the management board proposed increasing operational working hours from the standard 35-hour week to 40 hours while continuing to pay employees for 35 hours. The proposal is intended to support productivity and reduce structural operating costs across the German network. However, employee representatives have strongly resisted the plan. IG Metall considers preserving the 35-hour working week a non-negotiable red line, while Michael Häberle described the executive proposals as part of a “horror catalogue”.

Management Productivity Proposal:

• 40-hour operational week
• Pay remains 35 hours
• Productivity focus in Germany
• Cost reduction remains central
• Unions strongly oppose proposal

The disagreement over working hours has become a central part of the wider discussions between management and labour representatives. Häberle, who has spent 40 years at Mercedes-Benz, said he had never encountered such little willingness to compromise from corporate management. The management proposal effectively asks employees to provide five additional working hours each week without corresponding additional monetary compensation. Employee representatives have rejected that approach and have instead placed a 30-hour workweek on the bargaining table. This creates a substantial difference between the positions of management and labour as both sides discuss the future of German manufacturing operations.

5. Works Council Rejects Plant Closure Pressure

Employee representatives have responded strongly to Mercedes-Benz management’s warning over potential plant closures. The company’s general works council rejected the idea that facility closures should be used as pressure for concessions from employees. A spokesperson said that threatening plant closures was not a way to shape the future and warned that such an approach would face determined resistance. The works council also rejected the possibility of employees being pressured into accepting concessions through an ultimatum involving reduced costs or plant closures. The response reflects the deep disagreement between management and employee representatives over how productivity improvements and cost reductions should be achieved.

Works Council Position:

• Plant closures face resistance
• Concessions remain disputed
• 35-hour week defended
• 30-hour week proposed
• Negotiations remain far apart

The alternative proposed by employee representatives highlights how widely the two sides differ. Management is seeking longer operational hours while maintaining 35 hours of pay, whereas the works council has proposed reducing the working week to 30 hours. The contrast makes working time one of the clearest points of disagreement in the negotiations. The debate is taking place alongside wider concerns about German manufacturing competitiveness, international production costs, capacity levels, and the future structure of Mercedes-Benz’s domestic facilities. The outcome of these discussions will influence how the company approaches productivity and workforce arrangements in Germany.

6. German Auto Workers Are Also Protesting

The Mercedes-Benz dispute is unfolding during a broader period of labour activity across Germany’s automotive industry. Tens of thousands of automotive workers recently participated in nationwide demonstrations organised by the IG Metall trade union. Approximately 175,000 people took part across various vehicle manufacturers and component suppliers. Workers demonstrated against widespread industry layoffs while also highlighting external pressures, including competition from lower-cost Chinese rivals and steep US tariffs. One notable rally took place at the Untertürkheim plant, where workers carried a banner questioning the proposed working arrangements and the financial benefits received by company leadership.

German Auto Labour Protests:

• Around 175,000 participants
• Nationwide IG Metall demonstrations
• Layoffs were strongly opposed
• Chinese competition highlighted
• US tariffs also raised

The demonstrations show that the Mercedes-Benz negotiations are occurring within a much wider German automotive debate. Workers across vehicle manufacturers and suppliers are dealing with concerns about employment, international competition, and changing production conditions. The Untertürkheim demonstration is particularly relevant to Mercedes-Benz because the plant is directly connected to the current discussion about engine production and working conditions. The wider labour activity also shows that changes affecting German automotive manufacturing are being discussed across the industry rather than only within Mercedes-Benz. These pressures form part of the environment in which the company’s management and employee representatives are negotiating future production arrangements.

7. Kecskemét Is Becoming a Major European Production Hub

Mercedes-Benz has expanded its international manufacturing footprint as it works to optimise production costs and market proximity. A major example is the company’s Kecskemét facility in Hungary, where production capacity was doubled during the past year to reach 400,000 vehicles annually. This makes Kecskemét the company’s largest manufacturing facility anywhere in Europe by annual volume capability. Its capacity now exceeds that of any individual German assembly site. The Hungarian facility is also scheduled to play an important role in Mercedes-Benz’s electric vehicle transformation, with production of the electric C-Class planned to transition to Kecskemét in 2026.

Kecskemét Plant Expansion:

• Capacity doubled recently
• 400,000 vehicles annually
• Largest European facility
• Exceeds German site capacity
• Electric C-Class planned there

The expansion of Kecskemét provides important context for the discussions surrounding German manufacturing. The facility has significantly greater annual capacity than any single German assembly location and is positioned to support Mercedes-Benz’s electric vehicle production strategy. At the same time, the company is examining domestic German capacity as it deals with production costs and market demand. The combination of expanded capacity in Hungary and potential adjustments in Germany demonstrates how Mercedes-Benz is managing its manufacturing footprint across different locations. The Kecskemét facility is therefore becoming increasingly important within the company’s European production structure.

8. German Labour Costs Remain Far Higher

The differences in manufacturing costs between Germany and other production locations are a central part of Mercedes-Benz’s concerns. Internal corporate presentations shown at German sites indicate that manufacturing labour costs in Eastern Europe are approximately 75% below traditional German levels. The same internal data indicates that American manufacturing costs are almost one-fifth lower than German costs, while annual working hours at alternative international locations are frequently more than a quarter higher than domestic schedules. Eurostat figures for 2025 also show a major difference, with average manufacturing labour costs of €49.50 per hour in Germany compared with €35.00 across the European Union and €15.60 in Hungary.

German Labour Cost Comparison:

• Germany costs €49.50 hourly
• EU average reaches €35.00
• Hungary costs €15.60 hourly
• Eastern Europe much cheaper
• Working hours also differ

The figures show the size of the cost difference between Germany and Hungary. German manufacturing labour costs €33.90 more per hour than Hungarian manufacturing labour based on the figures provided. Even if German employees worked 40 hours while receiving 35 hours of pay, German labour costs would only fall to approximately €43.30 per hour. Under that calculation, manufacturing at Kecskemét would still cost about one-third as much as manufacturing in Germany. The figures help explain why the proposed five additional unpaid working hours would not by themselves eliminate the wider production-cost difference between the two locations.

9. Mercedes-Benz Is Already Reducing German Capacity

Mercedes-Benz has told its workforce that German manufacturing capacity currently exceeds market demand. During the summer, management informed employees that domestic plant capacity was significantly above what the market requires. The company has already responded by reducing its German manufacturing capacity by about one-tenth compared with 2024 levels. The adjustment forms part of a wider strategy to align production capabilities with actual market requirements. Mercedes-Benz is also planning further changes to its global production capacity, with the group targeting a reduction from 2.4 million vehicles to between 2 million and 2.2 million vehicles by 2028 or 2029.

Mercedes-Benz Capacity Adjustments:

• German capacity exceeds demand
• Capacity cut by one-tenth
• 2024 baseline used
• Global capacity also declining
• 2028-2029 target period

Michael Häberle has said management has signalled further German capacity reductions later in the decade, even if the works council agrees to the current proposal package. This indicates that the potential plant closures are connected to broader capacity planning rather than only the current working-hours dispute. Mercedes-Benz is examining production volumes in relation to market demand while also changing where vehicles and components are manufactured. The company is therefore managing several connected issues at once, including German operating costs, international production locations, capacity utilisation, and future vehicle demand.

10. Mercedes-Benz Faces a Broader German Automotive Shift

The changes at Mercedes-Benz form part of a broader restructuring across Germany’s automotive sector. Other major German manufacturers are also making significant workforce and operational adjustments as the industry responds to changing market conditions. Volkswagen’s works council recently approved 50,000 job cuts as part of its restructuring, while BMW is removing 8,000 posts across its network. Mercedes-Benz is simultaneously expanding its Kecskemét facility, reducing German capacity, and examining the future of its domestic assembly and powertrain sites. The company is scheduled to publish its formal 2026 annual figures in February, which will provide further information about production trends, capacity utilisation, and global market performance.

German Auto Industry Changes:

• Mercedes-Benz capacity reductions
• Volkswagen restructuring continues
• BMW removing 8,000 posts
• Kecskemét expansion continues
• 2026 figures due February

The future of Mercedes-Benz’s German manufacturing network will depend on how management and employee representatives address the current disagreements over costs, productivity, working hours, and capacity. Management wants to maintain German locations but has warned that closures could follow if structural cost targets cannot be achieved. Employee representatives have strongly rejected plant closure threats and opposed the proposed move to longer working hours for the same pay. At the same time, international facilities such as Kecskemét are becoming increasingly important to Mercedes-Benz’s production strategy. The company’s upcoming 2026 annual figures will provide additional context for these manufacturing developments.