Mercedes to cut more jobs in Germany as Chinese competition bites

A voluntary redundancy programme invites employees to leave their jobs in exchange for severance payments. Workers choose whether to participate, unlike in compulsory layoffs, where the company selects employees for dismissal. Mercedes-Benz is restarting this programme in Germany to reduce fixed costs as sales and revenue weaken.

The key mechanism is a negotiated departure. Mercedes pays eligible workers severance, while removing some future wage and employment costs from its books. The company did not announce how many German employees it hopes will leave. It said discussions with unions are still continuing.

This approach may make workforce reductions less abrupt for employees and less confrontational for the company. However, it still reduces the number of workers and changes German structures. Mercedes said it wants its structures to fit its revenue position, but it did not announce factory closures or specific job targets.

Mercedes-Benz has not disclosed a planned number of job reductions, so its cuts cannot yet be measured against its workforce or competitors’ totals. The company only said it would restart voluntary severance in Germany in December. The article also gives no total Mercedes workforce figure, preventing a percentage comparison.

BMW aims to cut 8,000 jobs by the end of 2027 through its own voluntary redundancy programme. Volkswagen Group plans to have cut 120,000 jobs globally by the end of the decade across brands including Porsche and Audi. Those are announced targets, not necessarily completed reductions.

The comparison shows the scale of pressure across Germany’s major carmakers, but not identical plans. BMW’s figure has a deadline, while Volkswagen’s covers its global group. Mercedes has supplied neither a number nor a deadline. Its chief executive said further details depend on ongoing discussions with unions.

Reducing the workforce can lower Mercedes-Benz’s fixed costs, especially payroll and related employment expenses. That matters because the company’s sales declined while it faced weaker demand in China. The severance programme gives workers a voluntary route out, but it also means fewer employees remain in the business.

The company has not said how many workers will leave, which factories are affected, or whether any plants will close. It has said Germany contains two-thirds of its employees and structures, despite representing roughly 15 percent of sales. That imbalance helps explain why German costs are under review.

Mercedes wants to adjust its structures to fit its revenue position. This could change staffing and operations at German sites, but the article does not specify the factory-level consequences. Union discussions are ongoing, and the company says it is pressing to reduce costs further. More concrete effects depend on those negotiations.

China is the world’s largest car market, so weaker demand there can materially reduce sales for global manufacturers. At the same time, intense competition forces companies to fight for buyers, often making prices less attractive for producers. That combination threatens revenue and profit margins.

Mercedes reported that overall third-quarter sales fell 4.5 percent to 30.7 billion euros, largely because of a collapse in China. Net profit still rose almost 30 percent to 1.52 billion euros in the quarter, but the company warned about full-year profits. More than 100 carmakers are competing in China’s price war.

The pressure has spread across Germany’s major carmakers. Mercedes became the third of the big three, after Volkswagen and BMW, to issue a profit warning for the year, citing difficulties in China. Falling Chinese demand therefore affects both current sales and plans to reduce costs at home.

China matters because it is the world’s largest car market and a major part of global carmaking competition. Mercedes-Benz’s chief executive said a global car company cannot put China aside. Leaving would mean abandoning a market the company considers too important to its worldwide strategy.

The immediate conditions are difficult. Mercedes said overall third-quarter sales fell 4.5 percent to 30.7 billion euros, largely because of a collapse in China. The country also has more than 100 competing carmakers, creating an intense price war that pressures manufacturers’ profits.

Mercedes therefore faces a difficult balance. It must remain in China while adjusting to weaker demand and lower pricing power. The company is responding by pursuing cost reductions, including a German severance programme. The article does not give a specific China recovery plan, but Kaellenius clearly rejected abandoning the market.

One alternative to reducing German jobs is to shift some future expansion or industrial structures toward lower-cost countries. Kaellenius said labour costs in China, Hungary, Romania, and the United States are lower than in Germany. He also said eastern Europe is open to industrialists looking to expand.

The mechanism would be cost location. If more activities were placed where labour costs are lower, Mercedes could reduce the expense of its overall structures without relying only on German workforce cuts. However, the article does not say that Mercedes has approved a production transfer or named a plant for relocation.

For now, the company is discussing further cost cuts with unions and restarting voluntary severance in Germany. Its chief executive is pressing to reduce costs and fit structures to revenue. Lower-cost countries may offer expansion options, but the article presents them as a broader possibility, not a confirmed Mercedes plan.

Fixed costs are ongoing business expenses that remain relatively stable even when production or sales change. In this article, Mercedes-Benz links them to its employees and structures, particularly in Germany. They matter because a company must keep paying them even when customers buy fewer vehicles.

The pressure appears when revenue falls. Mercedes reported a 4.5 percent sales decline to 30.7 billion euros, largely because of China. If staffing and other structures remain unchanged, each sale has to support more of the company’s continuing costs. That can squeeze profits and weaken financial performance.

Mercedes is responding by restarting voluntary severance in Germany and discussing further cost cuts with unions. The aim is to reduce its fixed-cost base and align company structures with revenue. The article does not list every fixed cost, but it clearly identifies workforce and structural costs as targets for adjustment.