German auto parts maker ZF announced on Friday that it will cut between a fifth and a quarter of its jobs in Germany due to problems with the transition to electric vehicles and foreign competition.
“The number of employees in Germany is to be gradually reduced by 11,000 to 14,000 from the current level of around 54,000 by 2028,” ZF said in a statement.
The decision to significantly reduce the number of employees in the country was necessary to “respond to the changes in the mobility sector, in particular in the area of electromobility,” ZF said.
The step was “difficult but necessary,” ZF CEO Holger Klein said in a statement.
“The seriousness of the situation calls for decisive measures so that the company can adapt to the more difficult market and competitive environment,” Klein said.
A restructuring of the automotive supplier in Germany was necessary to “strengthen our competitiveness and consolidate our position as one of the world’s leading suppliers,” Klein said.
Due to strong competition, cost pressure and weak demand for electric vehicles, the restructuring will focus on ZF’s electric motor division, the group said.
The emerging market, in which Chinese manufacturers are leading the way, was “highly competitive,” ZF said.
According to ZF, margins in the production of engines for electric cars were “low” and the group was struggling to “cross-finance purely electric drives” from its efforts in conventional and hybrid vehicles.
The switch to electric vehicles eroded demand for “transmissions for conventional and hybrid vehicles,” an area where German suppliers traditionally excel, the company said.
At the same time, “the current blatant weakness in demand for fully electric vehicles” left ZF with overcapacity in areas where high investments were being made.
Despite the difficulties, “the future belongs to electromobility,” said CEO Klein.
ZF would “continue to invest heavily in this area,” he promised, but would have to explore collaborations with other companies in the region to remain competitive.
– ‘Leaner’ –
As part of the restructuring, the Friedrichhafen-based supplier said it would “increase its investments” in automotive technology, vehicle chassis, industrial technology and aftermarket services.
ZF’s network in Germany would be made “leaner” after being gradually expanded through recent acquisitions, the group said.
The final extent of the job losses will depend on “the further development of the markets,” ZF said.
The EU wants to ban the sale of new cars that run on fossil fuels from 2035. This means that jobs in the sector will inevitably disappear.
Meanwhile, Chinese manufacturers have gained a lead in electric vehicles and are capturing an increasing share of the market.
Chinese battery manufacturer CATL has quickly become the world’s third largest automotive supplier.
The double shock of the end of the internal combustion engine and increasing Chinese competition is putting European suppliers under pressure.
In addition to ZF, parts manufacturers such as Bosch, Continental and Webasto have also announced that they will cut jobs.
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