Automotive industry: job cuts at ZF's driveline division

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The feared spin-off of the electric drive division at the struggling automotive supplier ZF is off the table. The company and employee representatives have agreed on a package of measures to save around 500 million euros by 2027. Around 7,600 jobs are to be cut by 2030. The company is relying on a voluntary redundancy programme, but has not ruled out compulsory redundancies.

In the "Division E", around 30,000 employees at several locations worldwide manufacture various components for electric and conventional drives. These include gearboxes, motors and control electronics. The drive division is considered the centrepiece of the Group. It is also ZF's largest division in terms of sales and number of employees.

Falling short of expectations

The Driveline division is suffering from the fact that demand for e-drives is not developing as expected. This is compounded by high costs and low margins for traditional transmissions. Most recently, ZF had also considered selling the division, which met with massive resistance from employees.

The spin-off is now no longer an issue; instead, a joint effort should bring the desired savings. "I am pleased that the E Division, the heart of ZF, will remain in the company," says General Works Council Chairman Achim Dietrich.

This feat of strength affects the German locations of the E Division, which employs around two thirds of the total of 30,000 people. As a rule, their weekly working hours are to be reduced to 32.5 hours – with correspondingly lower wages. ZF intends to postpone a wage increase planned for April.

7600 jobs to be cut

Around 7600 jobs are to be cut in the division by 2030. This is part of the already announced job cuts of up to 14,000 jobs across the Group and is not additional, emphasises HR Director Lea Corzilius. "These are painful losses, we don't need to fool ourselves," says Helene Sommer from IG Metall.

ZF is relying on voluntary redundancies and is offering a severance programme that employee representatives describe as "well equipped". In addition, older colleagues will be offered partial retirement and early retirement programmes. "Over the next two years, we will be addressing 2,200 colleagues," says Corzilius.

The Management Board and trade unions are confident that the targets set can be achieved without compulsory redundancies. However, nobody wants to rule this out completely. "I am convinced that we will achieve the targets and that compulsory redundancies will not be an issue," says Works Council Chairman Dietrich.

New CEO

The newly appointed CEO Mathias Miedrich speaks of a "genuine co-operation" between the company and its employees. Instead of selling the entire division, ZF now wants to examine which components it still manufactures itself and which can be purchased. To this end, TF also wishes to talk to other manufacturers about "partial partnerships".

"For example, we are talking about areas such as electric motors and inverters," says Miedrich on his first day as CEO. "These could also be joint ventures. But we can also imagine partnerships for gearboxes."

"We are aware that getting there will involve tough cuts for our employees," says Miedrich, but rules out plant closures. The division has large sites in Friedrichshafen, Schweinfurt, and Saarbrücken. "We are still examining what we can do to strengthen the competitiveness of the plants."

Debts in the billions

Meidrich will take over as CEO on 1 October from his controversial predecessor Holger Klein, whose contract was terminated prematurely in September. Klein had been at the helm since 2023 and had set the company on a course of savings and reform. One sticking point is the E division, parts of which are considered uncompetitive.

The company is also burdened by debt. Acquisitions such as TRW and Wabco in recent years have cost a lot of money, with liabilities totalling around Euro 10.5 billion. The zero interest phase is over, which is why ZF now has to pay millions in interest.

The foundation company made a loss of 195 million euros in the first half of the year. As the markets are very unstable, a loss is also expected for the year as a whole, it said. This would mean that ZF would slide into the red for the second year in a row.

(vbr)