German luxury car manufacturer Mercedes-Benz has announced plans to suspend all further investment at its German sites for the time being, considering a possible closure.
The decision follows prolonged disagreements between the company’s management, workers and trade unions over proposals to reduce production and labor costs.
“The executive board has jointly decided to halt all further investments in German sites. We are also weighing plant closures,” Mercedes board member Michael Schiebe said in a memo.
The move comes as the automaker faces increased pressure to make its manufacturing operations more competitive and rising production expenses, which has forced to examine in concrete and detailed terms which sites in Germany can afford to maintain.
“We all want to avoid plant closures at all costs. Unfortunately, we must now pursue this option in more concrete terms,” board of management member Britta Seegar said.
She added that the company was being forced to examine which German production locations it could continue to afford under the current financial and operating conditions.
One of the reasons behind the investment suspension is the high cost of manufacturing vehicles in Germany compared with other European countries led by China.
The carmaker, is the biggest and best-known brands has been struggling with declining sales and profits in recent years.
The German carmaker has also invested heavily in electric vehicles, but demand for electric vehicles (EVs) in Europe and in North America has been slower than many manufacturers anticipated.
Mercedes has also struggled with rising competition from cheaper EVs imported from China.
German carmakers include Volkswagen, BMW, Audi and Porsche.
