Mercedes-Benz will open formal negotiations with union representatives on how to achieve more substantial cost-cutting measures, particularly around labour costs and other structural factors. Human Resources Chief Britta Seeger confirmed the talks to Bloomberg, framing them as necessary to remain competitive: “We need to evaluate, have we done everything within Mercedes, within Germany, to be more competitive against our rivals.” 

Mercedes’ adjusted car division margins fell to 4.1% during Q1 2026, down 3.2pts from a year earlier, driven by slumping Chinese luxury segment demand, unrelenting US tariff pressure and the slower-than-expected adoption of electric vehicles. Weakened demand in European markets, while not a determining factor in the margin compression, have also played a role. 

AI deployment is the mechanism Mercedes-Benz uses to reframe the cost conversation internally. Around 60% of staff are already using AI daily—double the rate 18 months prior—with an ambitious target of 70% set for the end of 2026. Seeger’s framing of AI deployment has been highly cautious, positing it as a productivity tool rather than a blunt instrument for staff reductions. 

The automaker is targeting a 10% production cost reduction by 2027, and double that by 2030. Still, the pressure Mercedes faces is far from unique in German automotive: BMW issued a profit warning earlier in June, cutting its 2026 automotive EBIT margin forecast from 4-6% to 1-3%, citing a faster-than-expected collapse in Chinese demand and cost pressures related to the war in Iran. Volkswagen, meanwhile, is on course to cut 19,000 jobs by year-end as part of a restructuring targeting 50,000 German positions by 2030, with its 2026 operating margin projected at 4-4.5% — a figure its own finance chief has described as insufficient.

The simultaneous restructuring efforts from all three of Germany’s prestige automakers is not incidental: a substantial reshaping of the country’s largest and most prominent industry is increasingly inevitable. Germany’s automotive sector employs around 780,000 people directly and anchors an industrial ecosystem far larger; the collective pivot from defending job guarantees to renegotiating them signals that management at all three companies has concluded the current cost base is incompatible with survival at the required scale.

IG Metall’s position in any future negotiation will be decisive; the union has shown willingness to accept concessions in exchange for investment commitments at both Volkswagen and Continental, but the quid pro quo for loosening redundancy protections will need to be substantial.

Mercedes expects a stronger second half of the year, due in no small part to new model launches; the automaker has justified this by pointing to improving order intake. That optimism provides some negotiating room, but the broader structural pressures—a Chinese luxury market that is unlikely to recover to prior levels, European electric vehicle adoption that has not met targets, and a US export relationship complicated by tariffs—are unlikely to resolve in the next six months. 

Editor’s note

Mercedes-Benz reached out to correct that at no point during the Bloomberg article did Seeger confirm loosening job protections or make reference to the ZuSi labour agreement, as were indicated previously. The automaker provided Automotive World with the following statement:

“The global economic situation remains extremely volatile. Only by sustainably increasing our efficiency can we remain financially strong and capable of taking action. At the same time, we are facing immense price and cost pressure from competitors—particularly those from China—across all markets. In this context, structural costs in Germany—especially labor costs—are uncompetitive by international standards. We are therefore exploring various ways to improve efficiency and are engaged in intensive discussions with our social partners, aiming to jointly develop viable solutions to ensure our company’s competitiveness.”