Mercedes-Benz is poised for significant changes as the company announced on March 4, 2025, its agreement with the General Works Council on a comprehensive package of measures aimed at enhancing competitiveness. These initiatives come at a time when the company faces increased competition, particularly from Chinese manufacturers, and weakening sales of electric vehicles.
According to the company spokesperson, the measures encompass various savings strategies, including reduced compensation components and increased personnel flexibility through the introduction of more temporary work within production lines. Notably, part of this strategy includes implementing a severance program for employees not directly involved in production, which will operate under the principle of double voluntariness, ensuring both employee and corporate consent.
One of the pivotal points of this agreement is the extension of the existing employment security plan, known internally as "Zusi," to last until the end of 2034. This plan, previously set to expire at the end of 2029, affects approximately 91,000 employees across Germany. By affording employees this prolonged job security, the company hopes to alleviate concerns about job losses during these tumultuous times.
Employees, particularly those represented by IG Metall, are siding with the company’s strategy. They will see half of the recently negotiated salary increases within the metal and electrical industry passed along to them, with the remaining amount offset by additional non-tariff allowances. Despite the difficult financial circumstances, the profit-sharing bonus for 2024 is projected to be as much as 5,220 euros, which reflects a reduction from the 7,300 euros provided to employees over the past two years. This profit-sharing agreement, based on current company policies, will reportedly end after the 2025 financial year.
Mercedes-Benz CEO Ola Källenius, addressing staff concerns, emphasized the urgent need for the company to adapt more aggressively to the changing automotive market. “We play in the automotive Champions League,” Källenius stated, highlighting the company's strong product lineup and capable workforce. Nevertheless, he acknowledged the threat posed by newer competitors: “They are hungry and attacking us,” he said, stressing the need for Mercedes to become “stronger, faster, and hungrier.”
Despite Källenius' reassurances about maintaining competitive wages for employees, the company's management has agreed to forgo salary increases for the year 2025. With weaker business figures anticipated, lower bonuses for executives are also expected. "We can’t continue as before,” he stated. The decision was underscored by Ergun Lümali, head of the General Works Council, who urged workers across all levels to contribute to the company's competitive edge.
The measures also include flexible options for workforce reduction, primarily directed at administrative roles, which may involve voluntary severance packages aimed at creating opportunities for the remaining employees. The adjustments to personnel policies are seen as necessary to maintain operational efficacy and morale among the workforce.
The announcement follows substantial profit declines reported by Mercedes-Benz for the previous year, igniting the urgency behind these operational changes. The so-called "Next Level Performance" program has set ambitious targets, including lowering production costs by ten percent by 2027 and optimizing material and fixed costs to increase profitability.
Mercedes-Benz's plans also extend abroad, with the company set to relocate some production to Hungary, where costs are reportedly 70 percent lower than those based in Germany. Approximately 100,000 vehicles per year are expected to begin production at the facility in Kecskemét, tapping cost efficiencies along with access to lower-wage labor.
Overall, the measures being put forth signify the company’s attempt to stabilize its operations and continue thriving amid stiff competition. Stakeholders are watching these developments closely as they will significantly influence both the operational strategy of Mercedes-Benz and the job security of its employees.
Citing these rapid portfolio changes and widespread adaptation strategies, industry observers are acknowledging the difficulties facing legacy automotive manufacturers as they transition toward sustainable electrification and autonomy.
Mercedes plans to implement these changes without compulsory redundancies, emphasizing support through voluntary separations to maintain stability as much as possible. Nevertheless, the agility of this popular carmaker will depend on its ability to manage both costs and competitive positioning strategically.