Valmet Automotive, the Finnish contract manufacturer for Mercedes-Benz, said it will shed almost a third of its workforce as Europe’s car industry grapples with excess capacity and slowing demand.
The company announced on 23 September that the measures will affect up to 1,075 employees at its Uusikaupunki plant, equal to around 30% of its total staff. The reductions will be implemented through permanent job cuts, temporary layoffs and reassignments, reported Bloomberg.
Valmet Automotive has long been a strategic partner to Mercedes-Benz Group AG. It has produced the Mercedes A-Class compact since 2013 and currently manufactures the GLC sport utility vehicle and the AMG GT four-door Coupé, a company spokesperson said.
The move underscores how contract manufacturers, often the most exposed to cyclical demand swings, are bearing the brunt of Europe’s shifting automotive landscape. “The reductions are equivalent to the annual working hours of a maximum of 1,075 staff,” the company noted in its statement.
The cuts come as the European auto sector faces a convergence of challenges: softening demand for electric vehicles, rising competition from Chinese brands and persistent overcapacity in production.
Earlier the same day, Stellantis announced temporary shutdowns at plants in Italy and France due to weak orders, Bloomberg reported. Last week, Porsche and Volkswagen both revised down their earnings outlooks, citing a tougher market environment.
Valmet’s decision also coincides with its own strategic realignment. Earlier in September, the company said it would spin off its battery-pack business into a separate entity and expand into defence manufacturing as a contract partner, signalling a search for more resilient revenue streams beyond passenger cars.
The entry into the defence sector reflects a wider attempt to diversify amid uncertainty in the car market. Contract manufacturing of military vehicles could provide steadier demand and shield the company from the volatility of consumer-driven automotive cycles.
Meanwhile, separating the battery division aims to sharpen focus in a sector that remains a critical battleground for automakers, even as demand growth slows. The European Union has made battery production a strategic priority, and specialised suppliers are positioning themselves to win long-term contracts from carmakers transitioning to electric fleets.
For Finland, where Valmet Automotive is one of the largest industrial employers, the job cuts highlight the vulnerability of local economies tied to global auto cycles. The Uusikaupunki plant, once a symbol of Finland’s integration into Europe’s car supply chain, now faces a scaling back that could ripple across suppliers and regional employment.