Mercedes-Benz has opened discussions with employee representatives about tightening cost-cutting measures that could include lifting or easing the ban on dismissals at its German plants. Bloomberg reported that the move is being driven by prolonged weakness in the Chinese car market and US tariffs, while the company also aims to boost efficiency through expanded use of artificial intelligence (AI).
Background of the agreement
Britta Seeger, the company’s HR chief executive, said the talks could lead to changes to the labour framework agreement in force until 2034 — known internally as ZuSi (Zukunftssicherung, or "future-proofing"). The current agreement rules out compulsory workforce reductions for operational reasons at Mercedes’ German factories; any headcount reductions so far have been voluntary, via measures such as severance packages, early-retirement schemes or natural attrition.
The framework traces back to a 1997 employment agreement and has been renewed repeatedly, most recently extended in 2025 through the end of 2034.
Why reconsider the ban?
Seeger stressed the company must thoroughly review whether it has done everything to improve the competitiveness of its German operations. External pressure is visible across the industry: rival BMW warned of a sharp fall in automotive operating margin this year — potentially down to around 1 percent versus previously signalled levels near 6 percent — and has announced further cost-cutting beyond earlier plans.
AI as a productivity lever
Mercedes sees artificial intelligence as central to raising productivity. Seeger said AI is not merely a tool for reducing headcount but is reshaping how work is done within the company. According to Mercedes, about 60 percent of employees now use AI-based tools daily, up from 30 percent a year and a half ago, and the firm aims to reach 70 percent by the end of the year. In some divisions AI usage already stands at 100 percent.
Financials and outlook
In the first quarter Mercedes recorded an automotive operating margin of 4.1 percent, down from 7.3 percent a year earlier. Although a decline, the result was better than analysts had expected, making the drop less steep. Thanks to new model launches and a stable order backlog, the company expects improving performance in the second half of the year.
The outcome of the current talks will affect which measures Mercedes deploys to cut costs further and how its German manufacturing footprint fits into the company’s longer-term competitiveness strategy.
