Mercedes-Benz, under the leadership of CEO Ola Källenius, is bracing for potential headwinds from international trade disputes, particularly those involving the Trump administration. After a challenging year marked by fluctuating market demands and evolving economic landscapes, the luxury automaker is focusing on strategic cost management and accelerating its innovation in electric vehicle (EV) and hybrid technologies. However, at the forefront of Källenius’s concerns is the looming threat of tariffs, prompting a direct message to Washington: recognize Mercedes-Benz’s significant investments and contributions within the United States.
Addressing reporters on a video call, Mercedes-Benz CEO Ola Källenius asserted the company’s deep ties to the American economy and workforce amidst rising concerns over potential tariffs. “We’re also an American company,” Källenius stated, emphasizing the global automaker’s extensive operations and investments in the US. “Yes, we have our headquarters in Germany and we have European origins, but we feel American. I myself have spent six years of my Mercedes career in the United States too. My children are born in the United States. I feel deeply, deeply connected to the US.”
Källenius further elaborated on Mercedes-Benz’s enduring commitment to the American market, highlighting the company’s intent to expand its footprint and investments. “We are prepared to continue to invest billions, and we want to grow our footprint in the United States. So we are committed,” he affirmed. He also pointed out a significant aspect of their US operations often overlooked: “A little-known fact, we are one of the major industrial exporters out of the United States. Two-thirds of the vehicles that we make in our Tuscaloosa plant actually go out into the world, a significant part of them, obviously, to Europe.” This robust export activity underscores Mercedes-Benz’s role not just as a foreign investor, but as a substantial contributor to the US economy through international trade.
The automotive sector is currently facing potential disruption as former President Trump considers implementing new tariffs. Earlier in the week, the proposition of a 25% automotive tariff was floated, a measure that could significantly impact both domestic automakers like General Motors and Ford, and international brands such as Mercedes-Benz. Data indicates the considerable exposure of German automotive exports to the US market. Approximately 13% of all German car exports are destined for the United States, making it the largest single export destination, according to the German auto association VDA.
Hildegard Müller, president of the VDA, voiced strong opposition to tariffs as a negotiating tactic. “Tariffs are the wrong negotiating tool,” Müller stated, echoing the sentiment of many industry leaders who believe tariffs could destabilize global trade and negatively impact economic growth. The US has already imposed a 25% tariff on imported steel and a 10% tariff on Chinese imports, leading to retaliatory tariffs from China on specific goods. While some tariffs, like those on Canada and Mexico, were temporarily paused, the broader concern over escalating trade tensions remains.
The potential ramifications of sustained tariffs are prompting automotive executives to voice their concerns directly. Paul Jacobson, CFO of General Motors, addressed the uncertainties tariffs introduce into long-term strategic planning. “If they become permanent, then there’s a whole bunch of different things that you have to think about in terms of, where do you allocate plants, and do you move plants, etc.,” Jacobson commented at an investor conference. He highlighted the dilemma companies face when significant capital investments are jeopardized by unpredictable trade policies.
Echoing these concerns, GM CEO Mary Barra and Ford CEO Jim Farley have also publicly discussed the detrimental effects of tariffs. Farley, in an earnings call, warned analysts that “tariffs would wipe out billions in profits if they’re long-lasting” and lead to “higher prices for customers.” These statements collectively paint a picture of an industry on edge, apprehensive about the economic fallout from increased tariffs.
Mercedes-Benz CEO Källenius emphasized the substantial US workforce employed by the company, arguing for a balanced policy approach. “We have two large operations on the passenger car side, one in Alabama and one in South Carolina. Directly, we employ more than 11,000 people in the United States,” Källenius highlighted. This significant job creation within the US is a key point in Mercedes-Benz’s argument against tariffs, suggesting that such measures could harm American workers and communities dependent on these automotive operations.
Financially, Mercedes-Benz reported a sales decrease of 4.5% in 2024, totaling 145.6 billion euros, and a 31% drop in operating profits to 13.6 billion euros. The car division experienced the most significant profit decline, down by 40%, largely attributed to weakened demand in key markets like China. In response to these financial pressures, Mercedes-Benz announced a strategic pivot to reduce production costs by 10% by 2027 and to further invest in the burgeoning EV and hybrid markets. Unit sales also fell short of expectations, registering at 1.98 million vehicles compared to an anticipated 2 million. The company projects operating margins to range between 6% and 8% for the current year, a decrease from the 8.1% margin in 2024 and significantly lower than the 12.6% of the previous year.
In conclusion, Mercedes-Benz, under the guidance of CEO Ola Källenius, is proactively addressing the dual challenges of potential trade wars and evolving market dynamics. Källenius’s assertive stance emphasizes Mercedes-Benz’s integral role within the US economy, advocating for consideration of their substantial American investments and workforce as policymakers consider trade measures. The company’s strategic shift towards cost efficiency and electric vehicle innovation signals a commitment to long-term sustainability and profitability amidst global economic uncertainties.
