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ZF Friedrichshafen Navigates Severe Automotive Crisis with Comprehensive Restructuring
In the face of stagnating global vehicle production, slow electromobility adoption, rising costs, and geopolitical uncertainties such as US tariffs, ZF Friedrichshafen, a German automotive supplier based on Lake Constance, is undergoing its most extensive restructuring in history. The company is prioritizing profitability and competitive positioning for the future.
The restructuring plan is far-reaching, affecting various aspects of ZF's operations. One of the key changes involves job cuts. Up to 14,000 jobs in Germany are set to be eliminated by 2028, with approximately 11,200 full-time employees already cut since early 2024. This reduction particularly targets divisions affected by slow EV adoption, such as Electrified Powertrain Technologies, which employs 20% of the global workforce and contributes 25% of sales.
ZF is also critically assessing every product group, including challenging divisions like Electronics and Advanced Driver Assistance Systems (ADAS). This evaluation will lead to significant product program adjustments, with the company discontinuing technologies unlikely to be profitable, such as autonomous shuttles, and instead strengthening divisions with better long-term prospects.
Financially, ZF reported a net loss of €1.02 billion in 2024 and decreasing sales. Despite this, the company has improved its adjusted EBIT margin to 4.4% in H1 2025 from 3.5% a year earlier. ZF maintains a liquidity buffer of €8.1 billion bolstered by green bonds and loans, which helps sustain ongoing restructuring efforts.
Strategically, ZF is combining car and commercial vehicle performance programs into a permanent performance organization across the company. The company is reviewing corporate structures for efficiency and prioritizing areas aligned with software-defined vehicle (SDV) trends while trimming investments in less promising technologies.
The restructuring plan has sparked protests, with more than 10,000 participants targeting the division, and the union IG Metall warning against selling off the company's core business. However, a restructuring is seen as a necessary prerequisite for any potential sale or partnership.
ZF's three largest customers - Volkswagen, BMW, and Stellantis - are also facing challenges, which negatively impacts the supplier. The global production of cars and light commercial vehicles has fallen by 30 percent since 2018, affecting ZF and its competitors.
The division for drives, internally called "Division E", is a sticking point in the restructuring of the company. Worldwide, about one in five ZF employees is active in this division, which generated almost a quarter of the company's total revenue in 2024. However, this division is not competitive and is affected by the delayed launch of e-mobility, high costs, and low margins in the traditional transmission business.
On Thursday, the management of ZF, led by CEO Holger Klein, will present the half-year figures. The company is suffering from missing orders from manufacturers and high costs for the transition to electric motors. Despite these challenges, ZF is determined to secure its long-term viability in a rapidly evolving market.
- To bolster its competitive position and secure long-term viability, ZF Friedrichshafen is reassessing its product groups and alignment with emerging trends, such as software-defined vehicles (SDV), while considering discontinuing less profitable technologies like autonomous shuttles.
- In an increasingly technology-driven industry, ZF is strategically evaluating its divisions, including the seemingly crucial Division E which, while contributing significantly to revenue, faces competition and financial struggles in the transition to e-mobility.
