German automaker Mercedes-Benz is intensifying its cost-cutting efforts amid significant economic challenges, announcing the postponement of a special employee payment originally planned for July until next year. According to an internal letter sent to employees in Germany and reviewed by Reuters, approximately 90,000 of the company’s 108,000 German-based workers will not receive the annual “transformation component” special payment as scheduled. This payment typically amounts to 18.4% of an employee’s monthly salary, though Mercedes has not disclosed the total financial impact of the delay.
The decision comes in response to mounting pressures including global trade restrictions, difficulties in the Chinese market, and a perceived decline in Germany’s competitiveness as a manufacturing location. The letter from the executive board, based in Stuttgart, described the current environment as “dramatic” and underscored the need to reduce the company’s labor costs, which it labeled as uncompetitive internationally.
In addition to postponing the special payment, Mercedes plans to engage with the works council about extending working hours without additional pay in the coming weeks. Currently, employees covered by collective agreements work a 35-hour week, standard in the German automobile sector. The executive board suggested that increasing working hours while maintaining current wages would be the “most direct and, in our view, fairest way” to improve cost efficiency and secure the company’s future in Germany.
The general works council criticized the company’s approach, calling the postponement of the special payment “a unilateral decision,” and emphasized that the burden should not fall disproportionately on employees. The council also questioned the proposal for longer hours without pay, especially given underutilization at some German plants. It characterized reliance on unpaid additional work to restore competitiveness as “taking the easy way out.”
Recent comments from Mercedes supervisory board chairman Martin Brudermüller have added to the debate, suggesting that a return to a 40-hour workweek should be seriously evaluated. Although common in other sectors, the 35-hour week remains a hallmark of collective agreements in the German automotive industry, including at Mercedes-Benz.
The company’s financial challenges have been apparent in recent results. Mercedes reported a 17.2% decline in consolidated profit for the first quarter of 2026. Profit had already dropped nearly 50% in 2025, falling from €10.4 billion ($11.9 billion) in 2024 to €5.3 billion, amid tariff pressures, unfavorable exchange rate movements, and intense competition in China. Sales volumes and turnover also decreased, prompting the carmaker to implement a cost-cutting initiative more than a year ago dubbed the “next level performance” programme aimed at streamlining operations and improving efficiency.
Mercedes indicated that it will continue accelerating structural reforms, focusing on reducing costs per working hour to maintain competitiveness while seeking solutions in discussions with employee representatives to ensure the company’s long-term viability in Germany.