German-owned carmaker Mercedes-Benz SA (MBSA) expects to retrench up to 700 employees at its East London assembly plant in response to falling global demand for its C-Class sedan car range. The company will adjust production from three daily shifts to two, possibly as early as August.
In a statement on Thursday, MBSA said it had begun consultations with employees and unions “in accordance with section 189(3) of the Labour Relations Act”. The process, lasting up to 60 days, will include discussions to reduce manpower through early retirement, early severance and natural attrition.
Joint-CEO Andreas Brand said the company would also talk to components suppliers about the effect on their business operations and staff.
The East London plant employs about 3,200 people.
Brand said the carmaker had operated three shifts daily, Monday to Friday, for a decade. C-Class is the only car made there. The current model, which includes hybrid-electric and high-powered AMG variants, was introduced in 2021 after a R13bn investment from Germany.
The East London facility was designated global “lead plant” for the car. With more than 90% of its output being for export, mainly to Europe, Asia and North America, the declining demand in these markets was hurting SA, said Brand.
“We depend on our export volumes. This is a global issue.”
MBSA’s flexible production model “allows us to move volumes up and down to meet demand”, he said.
He described the reduced production plan as a reset. “We have reached a touchpoint where we need to go to a lower level.”
The global Mercedes-Benz group does not typically publish plant capacity and production numbers. However, it revealed the East London facility built 90,000 C-Classes in 2024, marking its first decline in production in four years.
Brand referred to this as a “turning point”.
While it was possible that the plant could return to three shifts eventually, it was unlikely in the short term.
In its statement, MBSA said local considerations also played a part in the decision to cut production. These included “fluctuations in the exchange rate, subdued household income, rising fuel prices, as well as increased energy and logistics costs”.
Load-shedding is also a major bugbear.
Despite cost-saving and efficiency improvements, more action was needed “to ensure the long-term sustainability of our operations”.
Brand however, insisted these were secondary considerations against the loss of global sales.
Referring to the prolonged challenges at SA’s ports, MBSA said it had fought for many years to persuade Transnet to upgrade the East London harbour, a crucial link for the assembly plant’s imports and exports.
Despite these local challenges, Brand emphasised that Mercedes-Benz’s production remained cost-competitive.
“It’s not that we are not performing. We are doing very well. The overriding problem is global sales. That’s the bottom line.”
He added that, depending on consultations, the downgrade to two shifts, followed by retrenchments, was likely to occur in the second half of August or early September.
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