German automotive supplier ZF has endured a brutal 2024 and reported yearly losses of more than €1 billion.
The company, which provides technology systems for cars, commercial vehicles and industrial applications, appeared to have been suffering amid challenging conditions.
In its annual report on March 20, ZF said it was in transition, achieving “key milestones that pave the way for a successful future”. It stressed, though, that had happened amid geopolitical uncertainty and volatile market developments.
CFO Michael Frick attributed the losses to €600 million in restructuring provisions and rising interest payments on debt, which increased from €9.9 billion to €10.5 billion.
Sales dropped by approximately 11 per cent, from €46.6 billion to €41.4 billion over the year, partly due to the €2.6 billion deconsolidation of its axle assembly systems business.
The outlook remained bleak: ZF said it expected sales to stagnate at €40 billion in 2025, with an adjusted Earnings Before Interest and Taxes (EBIT) margin of 3–4 per cent.
The company did anticipate its restructuring measures would start to yield results.
Last year, ZF announced it would have to close plants and cut 12,000 jobs. A year before that, it was able to earn a profit of €126 million.
Germany’s second-largest automotive supplier, ZF Friedrichshafen, is planning to close plants in Europe and cut up to 12,000 jobs. https://t.co/8VeKj5C1TT
— Brussels Signal (@brusselssignal) July 9, 2024
“2024 has shown just how much pressure our industry and our company are under. A rapid easing of the situation is not to be expected”, CEO Holger Klein said in the board of management letter.
Klein also highlighted “the significantly slower ramp-up of electric mobility”, while stressing ZF was following strategic goals at the beginning of 2024 to improve the outlook of the company.
He said it was the aim “to reduce between 11,000 and 14,000 jobs in Germany by the end of 2028 in a socially responsible manner wherever possible”.
Around 4,000 full-time equivalent positions in Germany have already been lost. Worldwide, the company has more than 161.000 employees, of whom around 52,000 worked in Germany.
“With these performance programmes, we are on track. In combination with strict cost discipline and the renegotiation of supply contracts, we managed to sustainably improve our cost structures,” Klein insisted.
“However, the savings were offset by sales declines and burdens resulting from the hesitant adoption of electric mobility. We must therefore continue to intensify our efforts to reduce costs and increase profitability this year and in the upcoming years.”
Klein said he was aware that many of the board’s decisions were unpopular in Germany.
“I take such criticism very seriously. It reflects the justified concerns of our employees and their families for their jobs and, in turn, for their future.”
“Nonetheless, I would like to stress that our program aims to secure long-term competitiveness while constantly meeting our responsibility as an employer,” he said.
The day before the release of the annual report, FZ unexpectedly replaced its supervisory board chairman, Heinrich Hieseinger, three years ahead of his contract’s expiration.
Hieseinger was said to have exerted insufficient pressure over the board and lacked automotive supply experience.
“The members of the Supervisory Board thank Dr Hiesinger for his outstanding work and achievements as Chairman of the Supervisory Board,” a ZF press statement said on March 19.
Rolf Breidenbach, former CEO of fellow German automotive supplier Hella, who has served on ZF’s board since 2023, will replace him.
Breidenbach previously worked for global consultancy McKinsey, which currently advises ZF on its cost-cutting programme.
German sports car manufacturer Porsche says it faces major cost reductions and could lay off up to 8,000 employees. https://t.co/daLjg2MCww
— Brussels Signal (@brusselssignal) December 17, 2024
