ZF in crisis mode: High debts and pressure to invest are causing problems for the company. The automotive supplier wants to cut thousands of jobs over the next four years – and thus get back on track.
Bitter news from Lake Constance: The automotive supplier ZF plans to cut up to 14,000 jobs in Germany in the coming years. The 35 locations in Germany are to be reduced, while larger alliances and leaner structures are to be created. The traditional company, which is struggling with the transition to electromobility and high debts, avoids the word job cuts. Instead, it talks about “strengthening strengths”. The plan is to be implemented by the end of 2028.
The job cuts are also higher than the ZF General Works Council originally expected. At the beginning of the year, it was said that up to 12,000 jobs would be cut in Germany by 2030. The scenario from January has been made significantly more severe by the Board of Management’s announcement. Even then, the employees were very dissatisfied.
Large part to be cut in production
The foundation company currently employs 54,000 people in Germany. At least 11,000 jobs are to be eliminated – that is, almost one in five positions. A large proportion are to be cut in production, others in research and development and administration. It is still unclear which location will be affected and how. “We will fight for every single job,” said ZF Works Council Chairman Achim Dietrich.
ZF CEO Holger Klein had already announced in April that the number of employees in Germany would not be able to be maintained in the long term. Other large automotive suppliers from Germany, such as Bosch and Continental, had also reported job cuts in recent months, but not on this scale.
Plant closures possible
“Our corporate responsibility is to make ZF future-proof and to develop the locations in Germany so that they are sustainably competitive and solidly positioned,” emphasized the ZF CEO. “We are aware that we have to make difficult but necessary decisions to do this.” The aim is to find the best possible solutions for everyone involved.
It is still unclear exactly how many jobs will be cut by 2028 – and it also depends on the development of the markets. “The reduction should be carried out in a socially acceptable manner as far as possible, with ZF taking advantage of the demographic structure of the workforce and fluctuation.” The group does not rule out redundancies for operational reasons. Severance pay programs are also conceivable. The company may want to close unprofitable plants – as announced last year for the plant in Gelsenkirchen.
Problem with the transition to e-mobility
ZF is expecting a decline in demand for one of its core products, transmissions. These are not needed in electric cars. The Friedrichshafen-based company’s problem child is also the division for electrified drive technologies. Like other German suppliers, ZF has invested a lot of money in the development of electric motors, software and components. But competition is tough. In addition, the technologies are currently barely making any money – also because demand for electric cars is weakening. This is leading to overcapacity in the production lines that have been set up with high investments, it was said.
For this reason, the procedures, processes and structures of this business area are to be examined particularly closely. “Despite the current market situation, one thing is clear: the future belongs to electromobility. We have made advance payments here and will continue to invest heavily in this area,” said ZF CEO Klein. Due to the changed market perspective, however, we must also be open to cooperation – and examine it.
Debt and austerity
The heavily indebted company imposed a strict cost-cutting program on itself in the spring. This year and next year, costs worldwide are to be reduced by around six billion euros, it said. This is also to be able to cope with the e-transition.
The main driver of the cost-cutting measures is the group’s high level of debt. Last year, this amounted to ten billion euros. ZF borrowed the money primarily for the acquisitions of the automotive supplier TRW and the brake specialist Wabco. The interest rate turnaround placed an additional burden on the group. It is currently paying hundreds of millions of euros to service its debt.
This limits ZF’s scope for maneuver: The supplier, which is majority owned by the Zeppelin Foundation of the city of Friedrichshafen, has to invest heavily in order to keep up with the competition despite the weakness in the electric car sector. In the next three years alone, ZF is planning global future investments of around 18 billion euros, for example in research and development. Up to 30 percent could flow to Germany.
Sale of security technology planned
It is not just personnel costs that are being cut. ZF has been making savings in various areas for some time now – and is even planning to sell the safety technology division. This is intended to significantly reduce the group’s debt burden. ZF had already announced the move in autumn 2022, but a date for a sale or IPO was recently unclear. The division mainly manufactures seat belts and airbags and accounted for a tenth of ZF’s sales of around 46.6 billion euros in 2023.
Around 169,000 people work for ZF worldwide. Around 10,300 people are employed at Lake Constance. Around 4,900 of them have job security until June 2028. ZF is represented at more than 160 production sites in 31 countries. The group plans to publish its half-year figures next week.
Source: Stern
