ZF Supplier Reports Achieving Cost Reductions, Yet Falls Short of Targets
Holger Klein, the CEO of ZF Friedrichshafen, is currently discussing the realignment of the company's drive division, known internally as "Division E." The division, which offers various products including steering systems, drives, brakes, safety technology, and chassis components, has been facing challenges in the rapidly changing automotive industry.
Division E has been affected by the delayed launch of e-mobility, high costs, and low margins in the traditional drive business. This, coupled with the EU's plan to phase out new internal combustion engine cars by 2035, could have immediate effects on employment at ZF.
Klein has expressed doubt about the prospects for 2026, saying, "We don't believe that 2026 will be better." The company reported a loss of 195 million euros in the first half of the year, and this loss is due to low worldwide vehicle production and missed orders from manufacturers.
ZF is heavily indebted, with net debt around 10.5 billion euros at the end of June. This debt mainly originates from the acquisition of automotive supplier TRW and brake specialist Wabco. Klein has called for a review of EU rules for the automotive industry in an effort to alleviate some of the financial burden.
In an attempt to close the gap, Klein expects to achieve current savings of around 5.8 billion euros by the end of the year. The company is also in the process of cutting thousands of jobs in Germany.
Klein is considering a partnership for Division E as a potential solution. This would allow for cost and risk sharing in the development of new products and potentially secure more employment. However, the CEO has not yet disclosed any information about which partners he is or will be in talks with regarding the revision of "Division E."
The chairman of the works council, Achim Dietrich, had previously considered a spin-off or sale of Division E to be a fatal mistake. However, Klein now believes that with partners, there is further growth potential, and this could have a positive impact on jobs in Germany. The works council has previously protested against the planned cuts at ZF, and talks with the employee representatives are expected to be completed by the end of September.
Despite the challenges, Klein remains optimistic. He stated that they are catching up with the measures they are taking, and with the right strategies in place, ZF may be able to navigate the changing landscape of the automotive industry.
