When we were following the Volkswagen/BMW auto contraction story, CTH noted the issue was likely to expand to Mercedes, that has now happened.

As Mercedes enters negotiations with German labor unions, the union leaders have balked at a request by the company to expand the work week from 35 to 38 hours.  Against a stagnant economy and poor financial returns, Mercedes is now saying all future investment in Germany will be suspended and the possibility of plant closures and layoffs loom large.

The primary reason Mercedes cites for their financial struggle is declining sales in the Chinese market as consumers switch to less expensive brands of similar quality.  Again, this doesn’t come as a surprise since Geely, a Chinese auto company purchased a 10% stake in Mercedes ultimately to gain access to Mercedes engineering and supply chains.

The result is what happens with almost all companies who allow China to take a significant interest in their production line. China figures out a way to make the same or similar product at a less expensive cost.  This is the same outcome suffered by Volkswagen, and now China is positioned to sell Geely autos into the German market.

(Telegraph) – Mercedes-Benz has suspended all future investment in Germany, warning it may need to shut plants and relocate jobs.

The carmaker has suffered from shrinking sales and profits in recent years, triggering a wave of cost-cutting which has culminated in a decision to stop investing in its domestic plants entirely.

Michael Schiebe, the production director, told employees: “The executive board has jointly decided to halt all further investments in German sites.”

Britta Seeger, the company’s workforce chief, said bosses would now “examine specifically and in detail which locations we can still afford in Germany”.

It comes amid a showdown between management and unions over the company’s cost-cutting plans.

The car giant, which is based in Stuttgart, has for months been pushing a plan under which its staff would work longer hours for the same pay. (read more)

Again, this is an outcome of German manufacturing policy in combination with EU energy policy.  Europe went all-in for the net-zero carbon emissions and the push for electric vehicles.  European mandates on EV production mean if EU automakers do not hit EV quotas they pay fines to Brussels.

To avoid the self-imposed fines, European auto companies purchase carbon credit certificates from Chinese EV companies.  Beijing then uses the funds from the carbon credit sales to subsidize lower prices on their EV exports to Europe.

The result, European automakers (Volkswagen, Mercedes) are financing the discount price of Chinese automakers (BYD, Geely) in Europe.

Yes Alice, that’s about the most European thing you can imagine.  Madness, all of it.