Photographer: Martin Leissl/Bloomberg

Mercedes Metal Stampers Brace for Fight as Electric's Star Rises

  • Shift rattles German auto giants from BMW to Schaeffler
  • There’s ‘disruption on many levels,’ factory chief says

The rise of the electric car is starting to ripple through factories that churn out traditional engines, setting up a clash with workers worried about their future on the production line.

Staff at Mercedes-Benz’s biggest engine plant in Stuttgart, Germany, will slow production starting next month amid a dispute over the company’s planned battery facility at the site. BMW AG is scaling back customization options to free up cash for its electric-car push. Schaeffler AG’s profitability targets are dropping as the company struggles to keep up with soaring investments in new technologies.

This string of announcements, in the space of less than a week, points to a seismic shift in the car industry, which remains the largest employer in Germany -- home to the world’s biggest automaker Volkswagen AG as well as luxury-car giants Daimler AG and BMW. Unchallenged for decades, these companies are finding they must either put all the resources they have into fending off the likes of Tesla Inc., or risk obsolescence.

“The industry is changing very rapidly,” Daimler’s head of powertrain production Frank Deiss told reporters on a conference call. “We’re experiencing disruptive impacts on many levels.”

In particular, friction is growing between workers who build combustion vehicles -- still the mainstay of most carmakers’ profits -- and managers seeking to position their companies for a battery-powered future.

Sedan Shifts

The latest sign of the tough road ahead came on Thursday. To protest conditions offered by Mercedes parent Daimler as it negotiates adding new battery-making facilities at its Untertuerkheim plant in Stuttgart, Germany, the company said staff will stop working overtime next month. That will will slow engine output, forcing it to cancel shifts for assembling the E-Class sedan, Daimler said.

Mercedes, which is investing 10 billion euros ($11.4 billion) as it prepares to roll out 10 electric models, expects as much 25 percent of its sales to come from the new technology by 2025, stoking concerns about job security particularly at engine plants.

“The changes that’ll happen over the next eight to fifteen years will directly hit plants like Untertuerkheim,” said Wolfgang Nieke, worker representative at the site, which employs 19,000 people. “If we don’t lay the groundwork for this shift now, the harder it’ll be down the line.”

Daimler and labor representatives have been in talks since May on the company’s plan to start making batteries and other electric-car components at Untertuerkheim, a 110-year-old site at company headquarters.

The works council is balking at the manufacturer’s proposed commitments on pay and future investments. Worker representatives have significant influence at German companies and are involved in shaping strategy and investments.

“Especially in Germany, which has limited battery-building know-how and manufacturing capacity, there is a big concern that the transition away from conventional powertrains will cost millions of jobs,” said Arndt Ellinghorst, a London-based analyst at Evercore ISI.

Daimler countered that the site will have to compete with battery makers around the world. While the company sought to defuse concerns about future jobs, it indicated it may choose to invest elsewhere if the terms aren’t right.

“We can only find a long-term solution with a competitive agreement,” Deiss said.

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