Largest Building Projects at Automotive Supplier ZF Unveiled
ZF Faces Large-Scale Restructuring Amid Automotive Crisis
ZF, a German automotive supplier based on Lake Constance, is currently undergoing a significant restructuring program due to the ongoing crisis in the automotive industry and high costs. The company, which employs approximately 50,700 people in production and administration in Germany, is planning to cut up to 14,000 jobs in Germany by 2028.
The financial struggles of ZF are evident. In the first half of the year, the company's Chief Financial Officer, Michael Frick, reported a loss of 195 million euros. The company's net debt stands at around 10.5 billion euros, largely due to recent acquisitions, notably of automotive supplier TRW and brake specialist Wabco.
The company's three largest customers - Volkswagen, BMW, and Stellantis (parent company of Opel) - are also not doing well, which further affects ZF's financial position. This has led to a slowing of vehicle production and missed orders from manufacturers.
To counteract these financial losses, ZF is focusing on cost-cutting, particularly at German locations. The company aims to retaining as many jobs in Germany as possible, but targeted cuts are necessary.
The division called "Division E" within ZF, which includes electric, hybrid, and internal combustion engine drives, is currently not competitive in some areas due to the delayed rollout of e-mobility, high costs, and low margins in the traditional transmission business. As a result, the company plans a spin-off and possible sale of this division, impacting up to 30,000 employees globally.
Tensions between ZF and employees have escalated, with employees demonstrating at headquarters and other locations due to announced cuts and austerity measures. Up to 5,700 jobs have already been cut since the beginning of 2024, and many employees have seen their working hours reduced.
The works council has called for a change of course, stating that previous restructuring attempts have been unsuccessful. The future beyond 2028 remains uncertain, but ZF is aiming to pivot towards software-defined vehicle (SDV) technologies and electrification, investing heavily in R&D and forming partnerships with firms like Qualcomm and Foxconn to stay competitive in future vehicle tech.
Internationally, ZF is closing plants such as the Detva factory in Slovakia due to lack of profitability amid the European auto market’s long-term decline, while simultaneously investing in other Slovak sites to produce electric motors for premium brands. This points to a strategy of concentrating resources on more promising locations and technologies while shedding less viable operations.
In summary, ZF’s restructuring after 2028 entails large-scale job losses and plant closures or sales focused mainly in Germany and some other regions, driven by industry shifts, financial pressures, and strategic refocusing towards electrification and software-defined vehicles. The production of cars and light commercial vehicles has fallen worldwide by 30 percent since 2018, and the future beyond 2028 remains uncertain.
Other businesses may need to reevaluate their relationships with ZF due to the large-scale restructuring, resulting in potential finance-related challenges. ZF's planned spin-off and sale of Division E could significantly impact other companies, as up to 30,000 employees globally could be affected.
