ZF reveals roadmap for restructuring the powertrain division

The supplier's management team has agreed on a roadmap for restructuring the powertrain division with the works council and IG Metal. The social partners intend to define measures to make the division more profitable by the end of September. These are likely to be tough cuts.

Image: ZF

We are talking about an “alliance for competitiveness and job security” that has now been formed. According to the Friedrichshafen-based company, the reorganisation of the division is to be carried out “jointly and collectively.” A corresponding agreement was signed on the sidelines of the ZF Supervisory Board meeting on 30 July. “Both sides are committed to constructive cooperation with the aim of finding viable solutions in the interests of the employees and the company.”

The Electrified Drive Technologies Division (or Division E for short) is responsible not only for electric drives but also for conventional transmissions and hybrid transmissions. However, Division E has been struggling financially for some time, which is why the focus of the reduction of up to 14,000 jobs announced last summer is on the drive division. According to media reports, scenarios such as a ‘carve-out’ (spinning off the division from the rest of the group to be open to partners) or even a ‘ramp-down,’ the targeted phasing out of the business, are on the table. Although this is likely to be merely preparation for worst-case scenarios, it shows how far the considerations at the group’s headquarters have now progressed.

It is therefore not surprising that such scenarios and reports have led to protests among the workforce. Ahead of this week’s important supervisory board meeting, thousands of employees at several Division E locations expressed their discontent in demonstrations. No immediate, drastic cuts were agreed upon, but rather the aforementioned alliance, which is now tasked with presenting measures by the end of September. The German business publication WirtschaftsWoche refers to a grace period for the drive technology division.

The company itself is keeping quiet. “The agreement marks the starting point for an independent and confident restructuring of Division E. Both sides aim to finalise the restructuring measures in concrete agreements with the relevant committees by 30 September,” ZF announced. “Division E is the focus of efforts to secure the strategic and economic future of ZF. It faces a variety of challenges arising from its special market position and the changing industrial structure, as well as from geopolitical and trade policy influences and regulatory requirements such as the EU’s CO2 regulation.” Further information will only be published after the talks have been concluded.

However, it is already becoming apparent that these measures will involve tough decisions. WirtschaftsWoche quotes an insider as saying that all scenarios would involve severe cutbacks in Germany. According to an unnamed manager, “extremely tough measures are necessary to save ZF.” The problem is that the division is posting heavy losses because there is not yet sufficient demand for the electric drives developed in advance, and management has agreed to prices that are too low for conventional transmissions and hybrid components in order to secure important orders. The business is therefore not profitable, while at the same time it is burdened by almost ten billion euros in debt and annual interest payments of almost half a billion euros, which, according to WiWo, ‘massively’ restricts the company’s room for manoeuvre.

In terms of products for electric mobility, ZF presented its new SELECT drive platform at the beginning of June. Using several modular systems for components such as the motor itself, inverters, converters, reduction gears and software, the supplier aims to be able to develop and manufacture customer-specific drive solutions quickly and cost-effectively. Since the individual components have already been coordinated during development, customers will be able to obtain individually specified drives instead of off-the-shelf motors.

zf.comwiwo.de

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