Mercedes warns two German plants could close over costs

Mercedes has warned that two of its German factories could be shuttered if the company cannot agree measures to lower high production costs. Production board member Michael Schiebe told employees on September 21 that Mercedes wants to keep every German plant but would place one vehicle assembly site and one powertrain facility into a closure contingency if the necessary cost and productivity measures are not agreed.

The company has not identified the two facilities and has made no formal closure decision. Germany's passenger car assembly network includes Sindelfingen, Rastatt, and Bremen, while main powertrain locations include Untertuerkheim, Berlin, and Hamburg. Powertrain refers to components that deliver power to the wheels, such as engines, electric drive units, and transmissions.

According to Reuters, the warning follows months of sharper pressure on German production costs. Mercedes told staff in June 2026 that it was intensifying global productivity efforts with particular focus on its German sites. The automaker says it has already reduced fixed costs by 25 percent since 2019 but needs further gains.

At its 2025 Capital Markets Day Mercedes set out a target to cut production costs by 10 percent through 2027 and to adjust nominal capacity. The company planned global passenger car production capacity to fall from 2.5 million vehicles in 2024 to between 2.2 and 2.0 million by 2027. At that time Mercedes said there were no plans to close plants in Germany and noted that annual production capacity at German plants was being balanced at an average of about 300,000 vehicles per site.

The September 2026 warning marks a clear shift in tone. Mercedes says keeping its German manufacturing footprint depends on reaching agreement on measures that both lower costs and improve productivity, and it describes German manufacturing as insufficiently competitive by international standards, singling out labor costs as a major factor.

The timing is notable because Mercedes continues to allocate new models to German plants. Rastatt began series production of the all-new GLA only days before Schiebe spoke to the workforce, and Sindelfingen is deep in a product transition. Sindelfingen is the lead site for the full-electric AMG GT 4-Door Coupe and also builds the GLC, E-Class, S-Class and the slow-selling EQS. On the powertrain side, Mercedes describes Untertuerkheim as the largest location in its global powertrain manufacturing network. Mettingen and Hedelfingen make electric axles, drive components and battery systems, while Untertuerkheim produces electric drive units, drive components and transmission-related items.

Mercedes says retaining its German network depends on agreeing measures that lower costs while raising productivity.

Workers and their representatives have pushed back against the warning. The company works council said the threat of closure is not an acceptable negotiation tactic. The warning came as IG Metall staged nationwide protests involving about 175,000 workers from automakers and suppliers across Germany, with Mercedes employees among those taking part.