Mercedes Offers Severance Packages of Up to €500,000 as Part of Cost-Cutting Plan

Mercedes-Benz has announced a major cost-cutting initiative aimed at saving around €5 billion by 2027. As part of the “Next Level Performance” program, the German automaker plans to reduce its workforce—though not through forced layoffs, thanks to an existing labor agreement that protects employees from dismissals until 2035. Instead, the company is introducing a voluntary severance program targeting more than 30,000 employees.

According to reports from the Handelsblatt, the severance packages are substantial and depend on factors such as the employee’s age, salary, and years of service. For some, the compensation could exceed half a million euros. These offers are reportedly intended for non-production staff, including supervisors and team leaders. For instance, a team leader with 30 years at the company and a monthly salary of €9,000 could receive a payout of more than €500,000.

Higher-level executives are subject to a separate restructuring plan, with a disproportionately large number of management positions expected to be eliminated.

This is not the first time Mercedes has offered sizable severance deals. During its previous “Move” savings program, the company paid out similarly high sums. One notable example: a 47-year-old administrative employee with 17 years at the company and a monthly salary of €9,136 received a severance payment of over €418,000.

However, participation in the new severance program is subject to a “double voluntary” principle. As Handelsblatt reveals from internal documents, both the employee and the company must agree to the exit. Mercedes reserves the right to reject applications, especially from high-performing employees it wants to retain during and after the reorganization.

The announcement comes at a time when the automotive sector is under intense pressure. Mercedes-Benz recently reported a 28% drop in profits, though it still earned €10.4 billion. BMW’s profits fell 37% to €7.7 billion, while Audi, a Volkswagen subsidiary, saw its net income fall by 33% to €4.2 billion in 2024.

Mercedes’ labor council initially described the company’s cost-cutting plan as a “horror list.” Nevertheless, in March, the council reached an agreement with company leadership. As part of the compromise, the no-layoff clause remains in effect until 2035. In return, employees will forgo a previously agreed-upon pay increase, and this year’s profit-sharing bonus will be smaller than usual.

Mercedes insists it is handling the transition in a fair and socially responsible manner. The goal is to create a leaner, more agile company with streamlined structures and greater use of artificial intelligence. For those who remain with the company, Mercedes describes the coming phase as “a new chapter filled with challenges and opportunities.”