German automotive giant Mercedes-Benz has decided to halt all new investments in its production facilities in Germany.
Due to rising production costs and a lack of progress in negotiations with unions, the company has also begun to evaluate the option of closing some factories.
Michael Schiebe, a member of the Mercedes-Benz Board of Management responsible for production, announced in a statement published on the company's internal communication network that the board has reached a joint decision to halt all new investments in facilities in Germany. Schiebe stated that it is not possible to invest in Germany with the current cost structure.
"We must consider the option of plant closures more concretely"
Britta Seeger, a member of the company's Board of Management, also made assessments regarding the future of production facilities in Germany. Seeger stated that it is necessary to examine in detail which facilities can continue their operations under current conditions. Emphasizing that they want to avoid factory closures as much as possible, Seeger said, "We all want to avoid plant closures at all costs, but unfortunately, we must now consider this option more concretely."
It is known that Mercedes-Benz had previously warned that two facilities in Germany could be closed. In a statement made in October, Schiebe indicated that two facilities could be closed if an agreement on cost reduction could not be reached, saying, "If we cannot achieve this, we will have to close an assembly plant and an engine production facility in Germany."
"Production costs in Germany are 5 times higher than in Eastern Europe"
According to reports in the German press, one of the most important reasons behind the company management's investment decision is the high labor costs in Germany. According to local sources, production labor costs in Germany can reach levels up to 5 times higher compared to some facilities in Eastern Europe. It is stated that similar cost differences exist in administrative expenses as well.
While the company is conducting negotiations with worker representatives to reduce production costs, IG Metall, one of Germany's largest unions, continues its negotiations to protect the rights and current working conditions of employees.
According to the German press, production costs are not the only factor behind Mercedes-Benz's investment decision in Germany. The company is also being affected by changes in the global automotive market in recent years. The weakening demand for luxury cars in China, which is considered the company's largest single market, is negatively affecting the company's sales. The increasing competition from Chinese automakers, especially in the electric vehicle market, is also increasing the pressure on German brands.
On the other hand, despite Mercedes-Benz's high investments in electric vehicles, the failure to reach expected demand levels in Europe and North America is deepening the economic challenges the company is facing.
News Source: 12punto
