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Katja Elbert, perceptify Founder

Dr. Katja Elbert
Managing Partner

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Cutting Is Not a Strategy

Germany's car industry is cutting jobs and arguing over weekly hours. But costs are not its only problem. Why cutting is not a strategy – and which questions belong on the table instead.

#AutomotiveIndustry #Transformation #Strategy #ConflictCompetence

Last week, Mercedes-Benz informed its employees via the company intranet that all new investment in its German sites has been halted. The company is now "forced to examine concretely and in detail which sites we can still afford in Germany", says Britta Seeger, the board member responsible for Human Resources. Weeks earlier, Michael Schiebe, the board member responsible for Production, had spelled out what would happen if costs did not come down: one vehicle plant and one component plant in Germany would have to close. The clear goal, he added, was still to keep all sites. The company has not said which plants might be affected. Since then, neither the vehicle plants in Sindelfingen, Bremen and Rastatt nor the component plants from Untertürkheim to Kölleda know whether they are the ones. The key investment decisions are due by the end of the year.

Mercedes is not alone. Volkswagen is cutting tens of thousands of jobs; in September its supervisory board approved the "Zukunftsplan 2030" (Future Plan 2030). BMW, long the model student, is cutting around 8,000 jobs worldwide. Suppliers are no better off: Bosch plans to cut another 13,000 jobs, ZF up to 14,000 in Germany, Schaeffler 4,700 in Europe. The German Association of the Automotive Industry (VDA) expects 225,000 jobs to be lost by 2035.

I worked at Bosch myself, in the automotive supply industry. Even back then, 25 years ago, the question of where the German car industry was heading was on the table. What has been missed since has been told often enough. What interests me is what the industry learns from it. And I have the impression that right now, when it matters most, it is practising the wrong thing.

Serial pole fixation

Anyone who wants to understand why the industry is where it is should look less at individual bad decisions and more at the movement between them.

Take Mercedes. In 2021 the group declared "Electric only": from 2030 it wanted to sell only fully electric new cars, "where market conditions allow". In 2022 came the luxury strategy, built on value over volume and a retreat from the broader segments. In 2024 came the U-turn. More money is flowing back into combustion engines; the talk is of 50 per cent electric and 50 per cent "high-tech combustion engines". The model plan to the end of 2027 sets four new electric cars against eleven new combustion models, even though demand for EVs is currently rising. Hardly anyone talks about the luxury strategy any more.

Politics sets the beat. In 2023 the EU decided to phase out combustion engines by 2035. At the end of 2025 the Commission proposed softening this: a 90 instead of a 100 per cent reduction in CO₂. Even the industry, which had demanded exactly this relaxation, was unhappy. VDA President Hildegard Müller called the new conditions "the opposite of planning certainty".

One could mistake this for a pendulum, and a pendulum would not be the worst thing. Organisations thrive on staying mobile between poles: between the new and the proven, between growth and consolidation. A system becomes unhealthy when it gets stuck at one pole. What is happening at Mercedes is something else. Each phase is an all-in bet on one pole, announced as if it would hold for a decade. Three years later comes an equally determined bet on the opposite pole. I call this serial pole fixation.

What makes it expensive is each individual change of direction, because each one rebuilds half the company: platforms, model planning, supply contracts, skills. What is missing is a foundation that can carry a change of course without starting from scratch.

Trying to win back a lost lead with longer working hours means applying a cost tool to a problem that does not have a cost cause.

Katja Elbert

The gap used to be paid for

Right now, the crisis is told almost exclusively as a story about costs. In Kecskemét, Hungary – since the summer the largest Mercedes plant in Europe – labour costs are 75 per cent lower, according to the company. Management initially wanted a 40-hour week; it is now reportedly pushing for 38 hours. The VDA President says: "More work must not be a taboo."

I don't want to play this down. The costs are real, energy prices are real, bureaucracy is real. Becoming more cost-efficient is necessary.

But the wage gap is old. For decades, German production was more expensive than Eastern Europe, more expensive than Asia, more expensive than almost anywhere else – and the German car industry was hugely successful all the same. The gap was paid for: with a technological lead and with products that customers around the world were willing to pay more for. That lead is gone.

Other figures show how far it has gone. In the first quarter of 2026, VW, Audi, BMW, Mercedes and Porsche together accounted for 1.6 per cent of China's market for fully electric cars – lower than ever before. And in the EU, BYD, Chery, Geely, Leapmotor and MG reached 10.8 per cent of new registrations in August 2026, according to the European manufacturers' association ACEA – four percentage points more than a year earlier.

These are questions of product, technology and speed. Responding with longer working hours means applying a cost tool to a problem that does not have a cost cause.

Building ahead instead of reacting behind

When I look at how companies act in this situation, I mostly see reaction. China figures are followed by job cuts, profit warnings by savings programmes, EU rules by model planning. Anyone who steers like this is always one step behind.

What is needed is the ability to withstand turbulence before it arrives: structures that can absorb a change of course without putting thousands of jobs on the line each time, and decision paths that spot developments earlier and translate them faster. Adaptability should be a property of the organisation. Today it is an emergency measure.

In concrete terms, that could mean:

  • Building platforms and plants that can carry different drivetrains. Then there is no need to bet everything on one wager and call it off three years later.
  • Treating skills development as a permanent state. If you keep developing your people, you don't have to get rid of them when things change.
  • Taking employees seriously as the people who know where production gets stuck.
  • Running through scenarios yourself rather than waiting for China, Brussels or the next quarterly report to set the agenda.

Negotiating where it's comfortable

The dispute at Mercedes is usually told as a stand-off. The board threatens plant closures; Barbara Resch, regional head of the metalworkers' union IG Metall in Baden-Württemberg, replies: "Plant closures are not going to happen with IG Metall." At protests in Sindelfingen, workers chant "Ola out!" – aimed at CEO Ola Källenius. Ergun Lümali, chair of the general works council, calls for board members "who believe in Germany as an industrial location and don't talk it down at every crisis".

Look more closely, though, and there is more movement than the slogans suggest. Management has moved away from the 40-hour week. The employee side is reportedly willing to work unpaid extra hours, but only for a limited period. The Mercedes works councils are said to be more flexible here than IG Metall, for which the 35-hour week is one of its greatest achievements. Lümali calls himself "solution-oriented" and has already prepared the workforce for the possibility that no profit-sharing bonus will be paid next year. So there is negotiation, and things are moving.

What is striking is where the movement stops. On the table are hours, time limits, Christmas bonuses, profit-sharing and the job guarantee, which currently runs until the end of 2034. Products do come up. Mercedes is currently deciding which new models will be built in which plant. The employee side wants binding commitments on this before making concessions, and IG Metall is demanding "binding prospects for products and investment". Management will only commit to investment if labour costs fall. So the question of what these plants will build does come up – as collateral. Whoever delivers first loses their leverage. Seeger says that "no solution corridor" is in sight yet. It is, however, only being looked for where things can be traded.

Both sides are fighting over symbols. For the union, the 35-hour week is more than a working-time rule; for the board, the plant closure is less a plan than a means of pressure. Seeger says the conditions under which the 35-hour week was agreed no longer exist in that form. She is right, and the same applies to the allocation of models to plants that is now being haggled over. As long as the negotiation is about symbols and collateral, nobody has to ask the most uncomfortable question: how will these sites earn their money ten years from now? The board can present cost-cutting as action, the union can present resistance as success. That is comfortable for both. For the sites, it will be expensive.

The industry is showing elsewhere that it can cooperate when it wants to. More than 30 carmakers, suppliers and chip companies, including BMW, Mercedes, VW and Stellantis, are jointly developing an open-source platform for vehicle software. Basic software that nobody differentiates on anyway is maintained together, so that everyone can focus on what sets them apart. In software, then, the industry has named where it does not differ. When it comes to its plants, nobody is asking that question.

Two questions that belong on the table

I don't have a finished plan. But there are two questions I would like to see raised wherever hours are being negotiated right now.

Do plants have to belong to one carmaker? The VDA itself has suggested opening German sites to foreign manufacturers. The Osnabrück plant is set to be taken over by the state of Lower Saxony and a financial investor. Taken further, this would mean production sites where several brands build their cars. What works for software could work for manufacturing capacity.

Why does every group organise its job cuts on its own? Today, every company launches its own severance programme. The people who leave have knowledge that is urgently needed elsewhere. A joint transfer and skills network of carmakers, suppliers, union and government would treat the industrial location as a whole rather than as the sum of individual savings programmes.

Neither question fits into a round of wage bargaining. That is why they belong on the table before the next one begins.

Threats are not conflict competence

What we are witnessing is a conflict, and conflicts are not a bad thing. They show that something important is at stake.

"Pressure and threats won't get us anywhere," says Barbara Resch. She is right. A threat replaces the argument with pressure, and "not going to happen" replaces it with resistance. Both feel like conflict, and both spare those involved the question that really matters.

Being capable of conflict means speaking the uncomfortable truth and still staying at the table. It means acknowledging that costs are a problem while admitting that they are not the biggest one. And it means negotiating about what hurts rather than about what everyone can agree on.

The German car industry has highly skilled people, enormous technical expertise and an infrastructure that many envy. Right now it is putting all of that into a dispute over weekly hours. Cut costs without saying what for, and you are managing a retreat. Agree on nothing but hours along the way, and you have signed off on that retreat together.

Sources (in German; quotations translated by the author)

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