Mercedes-Benz halts German investments as plant closures loom

By Ilona Wissenbach

FRANKFURT, Nov 12 (Reuters) - Premium automaker Mercedes-Benz is halting all investments in its German plants and exploring site closures to tackle the high cost of car manufacturing in the country, according to a memo to workers seen by Reuters on Thursday.

The move marks the latest escalation in Germany's auto sector crisis, which has already triggered the biggest ever restructuring at Volkswagen and is threatening tens of thousands of jobs in the country's most important industry.

In a sign of how quickly the crisis is spreading throughout the supply chain, Schaeffler said last week it would slash 3,460 jobs and close five sites in Europe, four of them in Germany, citing weak demand for combustion-engine autos.

Mercedes decided to suspend investments because it cannot agree with its works council and union representatives on labour cost reductions, according to an interview with executive board members shared on the company's intranet.

Mercedes production chief Michael Schiebe said management had "jointly decided to halt all further investments in our German locations."

The automaker has for months been pushing workers to find cost savings. In September, Schiebe warned staff that two plants could close in Germany if there was no progress on the issue.

Thursday's message suggested management is now preparing for potential closures.

"We all want to avoid plant closures at all costs. Unfortunately, however, we must now explore this option in more detail," management board member Britta Seeger said in the memo.

The threats come as negotiations continue with the IG Metall union, Germany's biggest.

Volkswagen starts its own negotiations with the top industrial union on November 24, with strikes looming at the turn of the year amid tensions over plans that could lead to 100,000 job losses and the closure of up to four German plants.

Consultancy Roland Berger has warned that at least 200,000 automotive jobs could be lost in Germany by 2030, after China fell away as a key profit driver due to intense competition. Those Chinese rivals are now gaining market share in Europe, prompting cries for help from executives calling for protectionist measures from Brussels.

(Reporting by Ilona Wissenbach and Rachel More; writing by Ludwig Burger, editing by Thomas Seythal, Christoph Steitz, Elaine Hardcastle)