Unions want to raise wages and companies want to reduce costs: Mercedes-Benz halts all investments in Germany and says it is considering closing factories

(Deutsche Welle Chinese website) German car company Mercedes-Benz announced on Thursday that it will stop all subsequent investments in Germany and consider closing some factories. This highlights the serious challenges facing the German automotive industry.

Like other German car companies, Stuttgart-based Mercedes-Benz is facing competitive pressure from Chinese rivals and high costs. Last month, it became the third major German automaker to cut its full-year forecast.

Company management has been negotiating with employee representatives in an attempt to find cost-cutting options; given the slow progress in negotiations, the company is now taking a tougher stance.

"The executive board has jointly decided to cease all subsequent investments at sites in Germany," board member Michael Schiebe said in an interview posted on the company's intranet and provided to Reuters and AFP.

He pointed out, "If we cannot achieve cost structure changes, then we will have to carefully evaluate which German bases should be closed." However, Siebe also emphasized that management still hopes to achieve a breakthrough in negotiations, but also mentioned the possibility that "our new products may only be produced overseas."

Another board member: Union demands 'totally excessive'

The Metal Industry Union (IG Metall), which represents the interests of German manufacturing workers, is currently demanding a 5% salary increase in wage negotiations. In the same document released Thursday, Mercedes-Benz board member Britta Seeger called the union's demands "completely excessive." "With labor costs in Germany already extremely high, ludicrously high even in international comparisons, such an increase will only drive costs up further," she said.

She said Mercedes-Benz had wanted to pursue a cost-cutting plan that would have included longer working hours without increasing pay, but that proposal also failed to reach consensus with the unions.

Auto industry analyst Ferdinand Dudenhoeffer said Thursday's news showed the German auto industry was in the midst of "the biggest crisis since its birth."

He said: "If there is no fundamental adjustment to the cost structure in Germany, the German automobile industry may not escape the fate of extinction."