German Auto Parts Giant ZF Announces 14,000 Layoffs

On July 30, German auto parts supplier ZF Group (ZF) announced a major strategic adjustment, and is expected to lay off about 11,000 to 14,000 employees in Germany by the end of 2028 to cope with the rapid changes in the automotive industry, especially in the field of electrification. Currently, the company has about 54,000 employees in Germany, which means that one in every four jobs may face layoffs. The layoff plan will involve about a quarter of the company’s total German employees, making it the largest layoff in its history.

According to data, ZF Group was founded in 1915. As one of the world’s leading automotive parts suppliers, the company is world-renowned for its production of gearboxes, chassis systems and safety technologies. However, as the global automotive industry rapidly transforms to electrification, the traditional internal combustion engine vehicle market has experienced a sharp decline, which has brought unprecedented challenges to parts suppliers such as ZF.

According to ZF Group, most of the layoffs will be concentrated in the production department and will also involve employees in the R&D department. The company plans to cope with the changes by integrating production sites and streamlining management. For those sites where the company cannot foresee long-term development prospects, they also face the possibility of closure. The layoffs will be carried out in a variety of ways, such as providing compensation and retirement plans, in order to reduce the impact on employees. Through these measures, ZF Group hopes to enhance its competitiveness and further consolidate its position as one of the world’s leading automotive parts suppliers.

While laying off employees, ZF Group also plans to further close some factories in Germany. Specifically, the company has decided to close the factories in Damme, Gelsenkirchen and Eitorf. The primary goal is to integrate the factories in Germany into a “more efficient location network” to reduce functional overlap between factories. However, if this integration measure is still not enough to achieve the set goals, the company does not rule out the possibility of further closing other factories.

Its CEO Dr. Holger Klein said in a statement last Friday: “Our corporate responsibility is to lead ZF to adapt to future development trends and actively promote the further development of the German branch to ensure its long-term competitiveness and solid market position. We fully realize that in order to achieve this goal, we must bravely make those difficult but crucial decisions.”

The market’s reaction to the news of layoffs is quite complicated. On the one hand, industry experts generally believe that this is an inevitable move for ZF to adapt to the development trend of the automotive industry and accelerate the transformation to electrification. With the sharp decline of the traditional internal combustion engine vehicle market, parts suppliers are facing tremendous operating pressure. The layoffs will help the company cut operating costs and provide the necessary financial support for the electrification transformation strategy. On the other hand, this large-scale layoff has also aroused widespread social concern and employee anxiety. The union and employee representatives have acted quickly and started negotiations with the company’s management to obtain more compensation and follow-up support measures for the affected employees to relieve their economic and psychological pressure.

In addition to ZF, automotive parts suppliers such as Freya Group, Continental, and Bosch have also announced layoff plans. On February 14 this year, Continental announced a series of new measures to enhance the competitiveness of its automotive business and officially launched a layoff plan. According to an announcement released by Continental, its automotive business will cut 1,750 R&D positions and optimize about 5,400 administrative positions, with a total layoff of about 7,150 people. The plan is expected to be completed by the end of 2025 at the latest. Industry insiders pointed out that since the growth of the electric vehicle market has failed to meet expectations and car sales have continued to be sluggish, parts suppliers have invested huge amounts of money in promoting the electrification transformation, but are currently facing severe market shocks.

According to the latest data released by German consulting firm Falkensteg, a total of 20 German automotive parts suppliers with annual revenues of more than 10 million euros filed for bankruptcy in the first half of 2024, a year-on-year increase of 60%. In addition, in the entire business field, including the automotive industry, a total of 162 companies in Germany with annual revenue of more than 10 million euros filed for bankruptcy in the first half of the year, among which the automotive supply chain and machinery manufacturing industries became one of the hardest hit areas.

Although the layoffs have brought short-term challenges and pain to ZF, the company is still confident in future development. At present, ZF has made significant progress in the research and development of electric drive systems, battery management systems and autonomous driving technology. Dr. Holger Klein emphasized that electric vehicles represent the development direction of the future parts industry, so ZF will increase investment in this field and actively seek partnerships with other companies to jointly promote innovation and development in the industry.

ZF’s layoff plan undoubtedly reflects the difficult choices under industry changes. In the wave of electrification transformation, ZF is working hard to adjust its strategy to adapt to new market demands. As for whether ZF can successfully achieve transformation in the future, we can only wait and see.