Mercedes-Benz to Restart Job Cuts Amid Tough Competition in China

Mercedes-Benz is set to restart a voluntary redundancy program in Germany as it grapples with stiff competition from Chinese car manufacturers. The announcement came from the company’s chief executive, Ola Kaellenius, during a call to discuss third-quarter results.

Kaellenius noted that while Germany makes up about 15% of the company’s sales, it accounts for two-thirds of its workforce. The company aims to reduce fixed costs further by restarting the severance program in December, although no specific number of job cuts has been revealed.

The decision follows a profit warning from Mercedes-Benz, which is now the third major German carmaker, after Volkswagen and BMW, to issue such a warning this year. The challenges stem from declining demand in China, the world’s largest car market, where over 100 competing carmakers are driving prices down.

Despite these difficulties, Mercedes-Benz reported a nearly 30% increase in net profit for the third quarter, reaching about 1.52 billion euros, even as overall sales fell by 4.5% to 30.7 billion euros. Kaellenius emphasized the importance of maintaining a presence in the Chinese market, stating that abandoning it is not an option for a global car company.

As part of its cost-cutting efforts, Kaellenius mentioned that labor costs in countries like China, Hungary, Romania, and the United States are lower than in Germany. This situation has prompted many companies to consider expanding into Eastern Europe, where labor costs are more favorable.