Posted By Global Banking and Finance Review
Posted on March 20, 2025
BERLIN (Reuters) - German automotive supplier ZF Friedrichshafen plunged to a 1 billion euro ($1.1 billion) loss last year as it set aside hundreds of millions of euros for a restructuring to address what it called the "enormous pressure" facing its industry.
Europe's auto sector is struggling with weak demand, the high cost of shifting to electric vehicles, cheap competition from China, and rising trade tensions.
ZF, which helps automakers develop gearboxes and hybrid drivetrains, said on Thursday it had set aside 600 million euros for restructuring costs last year, primarily for staff reductions. Its debt rose to 10.5 billion euros in 2024.
"The year 2024 has clearly demonstrated the enormous pressure our industry, and thus our company, is under," said CEO Holger Klein.
ZF is planning to cut up to 14,000 jobs in Germany by 2028, which would amount to one in four jobs. Several smaller plants have already been closed. Last year, the workforce in Germany shrank by around 4,000 positions.
"The measures initiated are necessary to position us for future growth," said Chief Financial Officer Michael Frick, adding that the restructuring would start to result in savings in 2025.
ZF lowered its annual sales forecast twice last year. Sales shrank by around 11% to 41.4 billion euros, partly due to the divestment of its axle assembly business. Its return on sales fell by 1.5 percentage points to 3.6%.
Adjusted for special items, operating profit fell by more than a third to 1.5 billion euros.
This year will bring no improvement, with revenue expected to come in above 40 billion euros amid "continued transformation pressure and uncertainty caused by geopolitical and protectionist influences".
The company's adjusted operating profit margin is expected to come in between 3% and 4% in 2025, with free cash flow at more than 500 million euros, ZF said.
"The outlook for the 2025 financial year remains cautious. Economic growth is once again expected to be weak, particularly in the euro zone and Germany, and vehicle markets could remain below the previous year's levels," ZF said.
($1 = 0.9202 euros)
(Reporting by Ilona Wissenbach, Writing by Friederike Heine; Editing by Ludwig Burger and Mark Potter)
