Electromobility ZF Continues to Develop and Manufacture Electric Motors and Inverters In-House

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Manufacture in-house at high cost or source more cost-effectively but accept a loss of know-how? This is the question ZF addressed as part of the restructuring of its Electrified Powertrain Technologies division—and it has found an answer that suits its strategy.

Electric motors and inverters are key components for electromobility. However, the question usually arises as to whether these should be manufactured in-house or purchased. Expensive in-house development and production is particularly suitable if you expect to gain a strategic competitive advantage. ZF shares this view and will continue to manufacture electric motors and inverters in-house in the future. The Group Board of Management has thus confirmed a corresponding recommendation that emerged from the special "make or buy" review carried out as part of the alliance to restructure the Electrified Powertrain Technologies Division (E). Due to the hesitant demand for electric vehicles, the supplier's passenger car drive division slipped into the red. Restructuring is currently on the agenda, which not only necessitates significant cuts, but also raises the question of whether the company should continue to manufacture key components itself in the face of persistently high cost pressure and volatile global supply chains.

Pros and Cons

A special audit was carried out for this purpose: In addition to economic and financial criteria, strategic aspects such as technological sovereignty, securing expertise, supply chain stability and geopolitical risks were also included in the assessment. The analyses were discussed intensively in an evaluation committee with equal representation. On this basis, the joint committee of employer and employee representatives made a clear recommendation for in-house production, which the Executive Board has now confirmed.

Clear Decision in Favor of In-House Production

"We made the decision to produce the core e-drive components motor and inverter in close cooperation with our employee representatives," explained ZF CEO Mathias Miedreich. "This fits in with our employee-oriented corporate culture, but requires significantly improved cost structures in order to get back on the road to economic success with our e-drives and secure employment in the long term." General Works Council Chairman Achim Dietrich adds: "The result of the special audit is a great success for us and the employees in Germany. We must not forget one thing: Last summer, both products were on buy, which would have meant huge job cuts and a loss of expertise." "The decision in favor of 'Make' is also a clear commitment to ZF's electric future," says Division President Sebastian Schmitt. "We are making a targeted investment in our own expertise and securing the technological keys for future generations of drives. But the truth is that we also have to close the existing cost gap in order to survive on the global market."

Decisive factors in the decision included securing important know-how, reduced dependence on external suppliers for key technologies, the close integration of development and production and better overall cost-effectiveness over the entire product life cycle.

Closing the Gap to the Target Costs

In recent months, the teams involved have already achieved noticeable cost improvements - among other things by focusing on costs in development, reducing variants and complexity, increasing automation, relocating to new production lines and intensive supplier negotiations.

Despite this progress, there is still a gap to the target costs. In order to become fully competitive, additional structural measures are necessary, including an adjustment of personnel capacities. Wherever possible, these adjustments should be made in a socially responsible manner. The aim remains to reduce surplus staff primarily through natural fluctuation, voluntary programs, partial retirement, intra-Group placements, transfer companies and the expiry of fixed-term employment contracts. Layoffs for operational reasons should continue to be avoided, but cannot be completely ruled out in view of the challenging market environment. (se)