Mercedes-Benz Pins Hopes on 800 Million Euro Labor Deal as Two German Plants Hang in the Balance

Mercedes-Benz wants at least €800M in German labor cost cuts and has floated closing two domestic plants as Q2 car profit fell to €49M.

Mercedes-Benz has opened a high-stakes front in its own backyard. With margins thinning and its most important market in retreat, the Stuttgart automaker is pressing for at least 800 million euros in cuts to its German labor costs — and management is now openly floating the shutdown of two domestic plants if the workforce refuses to bend.

The threat, first aired by production chief Michael Schiebe on Tuesday and reported in further detail by WirtschaftsWoche, targets one vehicle assembly site and one powertrain facility. In the assembly column, Sindelfingen is joined by Bremen and Rastatt as potential casualties; on the drivetrain side, Untertürkheim, Berlin and Hamburg are all in the frame.

A 35-Hour Week Under Siege

At the heart of the dispute is working time. CEO Ola Källenius and supervisory board chairman Martin Brudermüller want weekly hours pushed as high as 40 — without full pay compensation. That would mark a break with the 35-hour week that has been a fixture of the German auto industry for decades. The savings package also takes aim at Christmas and holiday bonuses, with the outright elimination of certain special payments on the table.

The numbers behind the push are stark. In the second quarter of 2026, operating profit at Mercedes-Benz Cars collapsed to 49 million euros, while the adjusted return on sales slid to 4.0 percent from 5.1 percent a year earlier. Deliveries in China — the group's single most important market — tumbled 30 percent to 98,624 vehicles in the same quarter. Impairments of 752 million euros on stakes in Chinese joint ventures weighed heavily on the quarterly result, compounding roughly 1.1 billion euros in restructuring costs booked across the first half.

Labor Pushback Meets a Sector-Wide Contract

Employee representatives have so far refused to sign off. Works council chief Ergun Lümali has signaled openness to a limited compromise — no more than two extra hours per week for a two-year period — but only if it comes bundled with binding commitments on new models, investment, and guarantees for jobs and sites.

Even if the two sides found common ground, the company could not act alone. Weekly working time is anchored in the collective bargaining agreement for the German metal and electrical industry. Without the consent of IG Metall — which is simultaneously demanding a pay increase in the current bargaining round — management has no legal route to a general extension of hours.

Buybacks as a Counterweight

While the labor standoff grinds on, Mercedes-Benz is working the capital markets to shore up its valuation. Under a buyback program launched on 1 September 2026, the group repurchased 916,805 of its own shares between 7 and 11 September alone. Since the program began, the cumulative volume has reached 1,606,805 shares.

The equity has felt the strain of the standoff. The stock shed 1.6 percent to 41.49 euros, leaving it just 0.9 percent above its 52-week low — a floor marked at 41.12 euros, a level the shares are now trading uncomfortably close to.

Berenberg Trims Its Target

Analysts are not waiting for a resolution. On 16 September, Berenberg cut its price target on Mercedes-Benz to 52 euros from 56, keeping a "Hold" rating. The broker pointed to a lack of near-term catalysts, persistent headwinds in China, geopolitical risk and inflationary pressure.

That backdrop frames the two paths ahead. If the board can convert the closure threat into real concessions, the 800 million euros in savings would permanently lower the domestic cost base and help defend operating margins — with the buyback adding a second lever to the recovery. If talks collapse, the company would have to execute the closures it has threatened, triggering substantial one-off restructuring charges, poisoning the industrial climate and raising the risk of production disruption. Even the full 800 million euros might not offset a further deterioration in Chinese demand, in which case margin erosion could entrench the stock's valuation discount.

For now, all eyes rest on 41.12 euros. Hold that support and the shares have room to build a base; lose it under sustained selling and the market will start pricing in a failed turnaround. The decisive catalyst is the next round of talks between management and labor over German staffing and site costs — only once it is clear whether bonus cuts and longer hours take effect, or whether plants actually close, will investors have the visibility they need to commit.