German auto supplier ZF announces deal to cut costs and jobs

German automotive supplier ZF on Wednesday announced a major deal with employee and union representatives to save €500 million ($588 million) in costs by 2027 and cut 7,600 jobs by the end of the decade.

The company said its electrified powertrain technology division - known as Division E - is to be retained and restructured instead of being sold or spun off.

The unit has faced issues due to the slow take-up of electric vehicle adoption, high costs and low margins in its traditional transmission business.

"The aim is to strengthen our position as a leading technological player in the market in the long term and to significantly increase our competitiveness," said ZF chief executive Mathias Miedreich, who replaced Holger Klein earlier this month.

"We are aware that the path to this goal will involve tough cuts for our employees," he added. "Now it is time to work together to overcome these difficult times for the good of the company."

ZF is one of the world's largest automotive suppliers and has been hit by the wider struggles of the European carmaking industry in recent years amid meagre demand, poor sales of electric vehicles and competition from China.

In 2024, the Friedrichshafen-based firm announced a target to cut between 11,000 and 14,000 jobs in Germany by the end of 2028. This includes the 7,600 job losses at Division E, a spokesman said.

Layoffs for operational reasons should still be avoided in the core division. The focus will continue to be on partial retirement, severance payments and early retirement, with a voluntary redundancy programme due to start in mid-October.