Follow the high interest rate phase
ZF Friedrichshafen is tackling its mountain of debt
January 28, 2024, 7:40 p.m
Listen to article
This audio version was artificially generated. More info | Send feedback
The auto industry has been in crisis for a long time. The suppliers also feel this. ZF Friedrichshafen was in the black for the first half of 2023 with eleven billion euros. That should change now. The company wants to get rid of its debts.
The automotive supplier ZF Friedrichshafen wants to concentrate on reducing its debts. “We are in a phase of high interest rates and this results in the urgency of reducing debt,” said CEO Holger Klein to the “Handelsblatt”. “We had to spend a low three-digit million amount more on interest in 2023 than in the previous year. This increases the pressure on the company’s profitability.”
Last year, the group managed to achieve the targeted free cash flow of one to one and a half billion euros and an EBIT return of 4.7 to 5.2 percent, said Klein. When asked whether ZF will have to pay over half a billion euros in interest this year, Klein replied: “On the whole, yes.”
Klein confirmed that 12,000 jobs could be cut at the company – but in a socially acceptable way. “The number describes the potential that demographic change offers us, among other things,” said Klein. “Even if we had to cut significantly more than 12,000 jobs by 2030, we would be able to do this without layoffs.” However, there is no way around acting quickly at loss-making locations.
Klein wants to push ahead with the planned separation from the airbag division. The key question is “how much more this business could grow if it had more capital available.” ZF is pursuing two options – a sale and a full or partial IPO of the division. “The division earns good money for ZF and our cash flow is sufficient even without a sale.”
ZF is one of the largest automotive suppliers with more than 50,000 employees in Germany alone. The group is majority owned by the Zeppelin Foundation of the city of Friedrichshafen. As of the first half of 2023, ZF was in debt for more than eleven billion euros. Most of the debt comes from purchases by the American auto supplier TRW and the brake specialist Wabcko.