Supplier ZF Retains Division E – Tough Cuts Necessary

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ZF Friedrichshafen will not sell its drivetrain division "Division E." Instead, the business unit must endure tough savings plans. Partnerships for parts of the division are being discussed.

A carve-out and subsequent (partial) sale of the "Division E" powertrain segment at the heavily indebted automotive supplier ZF Friedrichshafen is off the table. The company announced this following an agreement on an alliance for competitiveness and job security with the central works council and the IG Metall union. ZF will remain as an integrated technology group in the powertrain sector, and the other divisions will retain access to passenger car technologies.

Instead, the competitiveness of the existing products in the core division of Germany's second-largest automotive supplier is to be restored through internal restructuring. At the same time, (partial) partnerships for specific areas of electromobility are being explored. "Various negotiations with potential partners have been ongoing since the beginning of the year," said ZF's new CEO Mathias Miedreich to the "Handelsblatt." The search is worldwide, including China. The decisive factor is the best solution with the greatest value creation.

An open-ended special review until March 31, 2026, has been agreed upon for e-motors and inverters. The aim is to determine whether the decision to purchase all e-motors and inverters can be reconsidered. In addition to unit prices, development, investment, and production costs, the review will also include risk assessments for suppliers and technology dependency as well as negative synergies beyond Division E.

Additionally, further development of the "TherMaS" product (ZF thermal management system) has been agreed upon, with the goal of a market launch in 2029. The development of the 8HP evo plug-in hybrid transmission is also being consistently advanced, according to the announcement. However, development activities for on-board chargers (OBC), DC converters, and electric rigid axles (eBeam) are to be discontinued by March 31, 2026, at the latest.

7,600 Jobs Are to Be Eliminated

Management and employees agreed on extensive cost-saving measures aimed at achieving cost reductions of over 500 million euros by 2027. In Division E, which develops and produces electric, hybrid drives, and combustion engines, the elimination of 7,600 jobs is expected by 2030.

A spokesperson emphasized that this is not an additional job reduction – it is part of the up to 14,000 positions communicated until the end of 2028. Compulsory redundancies should still be avoided in the core division. Measures such as early retirement, severance packages, and phased retirement will continue to be applied. The voluntary program is set to start in mid-October.

The general works council added that through the reduction in working hours, the personnel cuts already made in 2025, and further reductions, the net reduction could be reduced to approximately 2,200 positions by 2027.

Tough Cuts for Employees

The new ZF CEO, Mathias Miedreich, who assumed the position this Wednesday (October 1), replacing the controversial Holger Klein, said: "With this alliance, we are breaking new ground in the industry and achieving a milestone for ZF. The aim is to strengthen our position as a technologically leading top player in the market in the long term and to significantly increase our competitiveness. We are aware that the path to this goal involves tough compromises for our employees."

Plant closures in Division E in Germany are not planned. Major production sites are located at the headquarters on Lake Constance, in Saarbrücken, and in Schweinfurt, Bavaria. The drivetrain division employs just under 30,000 people worldwide, with well over two-thirds of them in Germany.

Postponed Wage Increases and Shorter Working Hours

ZF works council chairman Achim Dietrich said: "It was important to us that the passenger car powertrain – the heart of our company – continues to have a future at ZF and that the carve-out of Division E is off the table. We also see this alliance as a signal beyond ZF that technologies and products 'Made in Germany' have a good perspective." The shared goal is for ZF to present itself confidently again, for motivated employees to work on innovative products, and for the company to be technologically at the forefront. "The deal is completely fine with us."

Among other measures, the wage increase of 3.1 percent scheduled for April 2026 is to be postponed to October, as the company further announced. For employees of Division E in Germany and at the Schweinfurt and Friedrichshafen locations in Operation Z – Administration, Research, and Development – weekly working hours will generally be reduced by around seven percent to 32.5 hours per week until the end of 2027, with a corresponding reduction in salary. Non-tariff employees will also not receive any increase in their pay. The executive board is also waiving their compensation proportionally.

Billions in Debt at ZF

The foundation company recorded a loss of 195 million euros in the first half of the year. Since the markets are very unstable, a loss is also expected for the full year, it stated. This would put ZF in the red for the second consecutive year. ZF has been on a shopping spree in recent years – and that has cost a lot of money. In particular, the acquisitions of the automotive supplier TRW and the braking specialist Wabco need to be absorbed. Net liabilities amounted to around 10.5 billion euros at the end of June.

During the period of low interest rates, financing was still relatively inexpensive. Currently, according to a spokesperson, the company has to pay an average of 4.5 percent in interest. This involves hundreds of millions of euros—money that is missing elsewhere, for example, in future products.

With material from dpa