Mercedes-Benz will suspend all future investments in Germany

London | Financial Times Mercedes-Benz has decided to suspend "all new investments" in Germany. The German carmaker also said factory closures were now an option, marking an escalation of the standoff with unions in its bid to reduce labor costs.

The company proposed longer working hours without additional pay to increase productivity, but was unable to reach an agreement with its works council despite four months of negotiations.

In an interview with members of the board of directors published on the company's intranet this Thursday (12), production director, Michael Schiebe, stated that "current cost structures do not allow us to invest in Germany".

Britta Seeger, the group's director of labor relations, added: "We all want to avoid factory closures at any cost. Unfortunately, however, this is now an option we need to look at more concretely."

The automaker issued a profit warning last month due to a sharp drop in sales in China and accelerated its restructuring measures to face the advance of Chinese rivals in its home markets.

The company proposed that employees work 40 hours a week without additional pay, arguing that high labor costs are eroding the country's competitiveness.

Currently, a 35-hour week is the standard established by collective agreements for around a fifth of German workers, concentrated in sectors such as automotive, engineering and iron and steel.

"Despite numerous intense discussions, at this point we do not see a path to an agreement," Schiebe said. "But we need to act now. We operate in an extremely challenging environment... This has fundamentally changed our economic situation."

The German automotive industry is under intense pressure due to high labor and production costs, which have made it difficult for manufacturers to compete with more affordable Chinese electric and hybrid vehicles.