The crisis in the German auto industry is deepening after the top management of Mercedes-Benz issued a stark warning about the potential closure of production facilities on home soil. Against the backdrop of shrinking market shares and crushing competition from cheaper Asian manufacturers, the company announced that the future of at least two German factories is at stake.
The internal restructuring plans directly affect a main assembly plant for finished cars and a plant for the production of powertrains and components. Management has issued an ultimatum that unless radical measures are taken to control high domestic labor and production costs in Germany, the shutdown of assembly lines at these facilities will become an inevitable reality. By comparison, operating costs at other European locations of the brand – such as the plant in Kecskemét, Hungary – remain about 70 percent lower than those in German bases.
The news immediately provoked a sharp response from the influential IG Metall union, which categorically stated that such threats to close factories cannot be a workable approach to shaping the future. Tensions in the sector escalate at a time when a number of German manufacturers are looking for a way out of expensive production at home, and the situation that has arisen is putting social peace in Europe's largest economy under serious strain.