ZF is now considering phasing out the driveline division

The future of ZF's driveline division has been under scrutiny internally for months. An exit from the driveline business is now also being discussed - as one of several conceivable scenarios.

Image: ZF

At least that is what the German business publication WirtschaftsWoche reports, citing several insiders. It is known since February that the ZF management team has been considering options for the Electrified Powertrain Division. Even if the name suggests otherwise, the Electrified Powertrain Technology Division not only bundles electric drive systems, but also all passenger car drive technologies, including hybrids and conventional transmissions.

One of the scenarios currently being discussed at Lake Constance is a carve-out, in which the business unit would first be separated from the rest of the Group in order to be then open to a partner or a buyer, which is probably not the goal internally at ZF. This is basically the scenario called ‘Verde’, which the Handelsblatt reported on in February. Such a spin-off would affect more than 32,000 employees and a sales volume of 11.5 billion euros – around one-fifth of the Group’s workforce and one-fourth of its sales.

As WirtschaftsWoche now writes, a ‘ramp down’ scenario is also being played out internally. This would be nothing other than the targeted phasing out of the business. ZF has also confirmed this to WirtschaftsWoche, but described it as “unlikely and strategically undesirable.” This is because the ‘ramp down’ scenario is probably only an option in the event that no partner is found for the drive business. “Alternatives in which we do not find a partner must also be considered. The most unfavourable option would be to phase out the active business without any new product developments,” said a spokesperson.

In other words, the phasing out of the entire drive business is currently more of an emergency nail, but one that ZF wants to be prepared for in case of doubt. In fact, ZF is currently still pushing ahead with new developments in its drivetrain division: this week, the company presented new solutions from the Electrified Powertrain Technology division at a specially organised ‘E-Mobility Tech Day’, including a further development of the eight-speed hybrid transmission, but above all the new SELECT electric drive platform, with which the supplier aims to provide customers with suitable drive solutions quickly and cost-effectively from several modular kits for electric motors, inverters, converters, reduction gearboxes and software.

According to the WiWo report, ZF intends to make a decision on the future of the driveline division in the second half of the year. As ZF has probably renegotiated an important financial ratio, the ‘financial covenant’, with lending banks, there are many indications of a very tense financial situation in Friedrichshafen, according to the business magazine. This covenant specifies the ratio of net debt to EBITDA and thus sets debt in relation to earnings before interest, taxes, depreciation on property, plant and equipment and amortisation of intangible assets. This value was raised to 4.0 for five quarters and should return to 3.25 from 2026. If ZF does not comply with the agreed covenant, the lenders could cancel existing credit lines or demand the immediate repayment of current financing. As the covenant must be complied with on a quarterly basis, the next deadline for this is 30 June.

wiwo.de (in German)

0 Comments

about „ZF is now considering phasing out the driveline division“

Leave a Reply

Your email address will not be published. Required fields are marked *