Foto: BB.LV / Автострада
The reason is excessively high labor costs, falling profits, and employees' unwillingness to agree to worse working conditions. At the same time, Eastern Europe is becoming an increasingly attractive region for the corporation. As reported by Deutsche Welle citing Reuters, Mercedes-Benz management has already frozen new investments in all of the company's German enterprises. **Five additional hours of work — without a salary increase** The main sticking point has been management's demands to increase the working week from 35 to 40 hours without a corresponding salary increase. For the German union IG Metall, this is unacceptable: the 35-hour workweek is considered one of the most important achievements of automotive industry workers. In addition, the corporation intends to reduce additional payments to employees, including bonuses, profit-sharing, vacation pay, and Christmas bonuses. Mercedes-Benz's HR director Britta Zegers acknowledged that the company is already forced to seriously consider closing its plants. "We all want to avoid plant closures at any cost. But now, unfortunately, we are forced to consider this option more concretely," she stated. **Why is Eastern Europe benefiting from Germany?** A particular interest for the Baltic states is the comparison of labor costs. According to Mercedes-Benz management, one hour of work in Germany can cost the company five times more than in Eastern Europe. This is why the corporation is expanding production in Hungary, where costs are significantly lower. If negotiations with German unions end without results, new Mercedes-Benz models may begin to be produced exclusively outside Germany. However, there are no reports of plans to relocate production directly to Latvia, Lithuania, or Estonia. Nevertheless, what is happening shows how seriously the industrial map of Europe is changing: even the largest German manufacturers are increasingly considering countries with lower production costs. **Mercedes-Benz profits are rapidly declining** The corporation's problems are not only related to wages. German automakers are facing pressure from multiple fronts: American tariffs, declining demand, price competition, and the rapid advance of Chinese automotive brands. In the first nine months of the year, the profitability of the Mercedes-Benz Cars division was only 3.3%. The head of the corporation, Ola Källenius, has set a goal to reduce labor costs in Germany by 20%, bringing them closer to the level in the U.S. Mercedes-Benz currently has 12 production sites in Germany. Previously, management warned that in the absence of an agreement with employees, two plants could be at risk of closure. **The German automotive industry faces a new wave of layoffs** The situation at Mercedes-Benz reflects a broader crisis in German industry. According to the employers' association Gesamtmetall, about 350,000 jobs have disappeared in Germany's metallurgy and electrical engineering sectors since 2019. In the future, another 300,000 jobs could be at risk. Next week, Germany is expected to see one-day strikes after three unsuccessful rounds of negotiations between employers and unions. It is anticipated that employees of Mercedes-Benz will also join the protests. For Latvia, what is happening is important not only in terms of the future of the European automotive industry. Germany remains one of the key economic partners for the Baltic states, so serious problems in German industry could affect component suppliers, transport companies, and other enterprises connected to the German market. At the same time, relocating production to countries with lower costs could open new opportunities for Central and Eastern Europe. However, for now, Mercedes-Benz is primarily focusing on Hungary rather than the Baltics.
