ZF could spin off its driveline division

The fact that the German supplier is struggling financially is nothing new. Last summer, ZF announced plans to cut up to 14,000 jobs in Germany – primarily in the ‘Electrified Drive Technologies’ division. In addition to electric drives, this also includes the transmission business for plug-in hybrids and conventional combustion engines.

Individual site closures were announced at the time, as the division had taken over numerous sites in Germany through acquisitions (such as TRW and Wabco). Still, the prospect of possible technological partnerships for individual areas was also on the table. However, there was no talk of spinning off the division.

However, according to a report in Handelsblatt, that is exactly what is being planned. The report states that a spin-off would affect more than 32,000 employees and a sales volume of 11.5 billion euros. “One in five employees and almost a quarter of the Group’s turnover would be spun off,” the German newspaper writes. Although “only” 8,000 people are directly employed in the e-drive division, a spin-off would affect not only its main location in Schweinfurt, but also the company headquarters in Friedrichshafen and the transmission plant in Saarbrücken.

ZF would spin off its core business

A ZF spokesperson emphasised: “In order to enable the division to grow profitably again and to make the necessary investments, we are currently examining strategic cooperations and partnerships.” That could relate to individual components or the entire division. And: “We are not commenting publicly on these internal reviews.”

If ZF is indeed examining the spin-off of the entire division – which the spokesperson did not deny – it would be a highly symbolic move: the abbreviation ZF stands for Zahnrad-Fabrik (cogwheel factory), and the company was founded in 1915 as a Zeppelin subsidiary to manufacture transmissions for aircraft, motorised vehicles and motorboats. If the company were to spin off the traditional transmission business and the promising e-drives, it would be an even bigger step than the spin-off of Continental’s drive division as Vitesco Technologies. Continental was a tyre manufacturer that became an automotive supplier. At ZF, on the other hand, gears have traditionally played a major role. If the drivetrain division were to be spun off, ZF would still have business areas such as Chassis Solutions, Electronics and ADASm Commercial Vehicle Solutions or Passive Safety Technology.

Even in the event of a successful spin-off, the future is unclear, as it also depends on the potential partner or buyer. The Handelsblatt tends to rule out German suppliers such as Bosch or Schaeffler – due to antitrust reasons or Schaeffler’s recent takeover of Vitesco. The Hyundai Group with, its own supplier Hyundai Mobis, and Foxconn are rumoured to be among the interested parties. The Taiwanese have already held a stake in ZF’s axles division since it was spun off in 2023.

The catch: the e-drive division has record orders totalling more than 30 billion euros. However, these contracts were apparently bought at a high price, as ZF is said to have undercut the competition on some of the deals – beyond the limits of profitability. “If we complete the orders in full, we will make a loss in the mid-single-digit billion euro range over the next three years,” Handelsblatt quotes an insider as saying. It thus remains to be seen how attractive the entry is for interested parties.

Although no buyer has yet been found, the management’s timetable is tight: The spin-off should be completed this year, with a possible sale in 2026, according to the report. In fact, it almost seems like an emergency sale, as the timetable seems to have been finalised before ZF has even created the means to implement it. According to the Handelsblatt, specialists are still being sought for the spin-off, and the business newspaper was able to view corresponding job advertisements.

handelsblatt.com (in German)