The heavily indebted German automotive supplier, ZF Friedrichshafen, says it will cut up to 14,000 jobs, which would represent one in four employees. German media is reporting that the job cuts represent a “historic figure” and bode poorly for the teetering German automotive sector as a whole.
According to the company’s plans, between 11,000 to 14,000 people will be laid off by 2028, with ZF CEO Holger Klein stating it is his “entrepreneurial responsibility” to ensure the company is “fit for the future and to develop the locations in Germany so that they are sustainably competitive and solidly positioned.”
Klein described it as “a difficult decision,” adding that bargaining agreements with workers dating back to 2020 noted that locations in Germany that were no longer competitive would be closed.
German industry is facing massive headwinds, and the company appears to be putting the job cuts in the context of broader economic trends besetting the country, saying that “declining competitiveness” is behind the decision.
Last year, ZF increased sales by 6.6 percent to €46.6 billion, but high interest payments are eating into the company’s profit margin. It earned €126 million in profit, which was 67 percent less than in 2022, according to a report from German financial newspaper Handelsblatt. The German paper indicates that “massive resistance” is brewing from employees due to the job cuts, and ongoing protests can be expected.
As Remix News reported, bankruptcies soared in 2023 in Germany, with data showing that there were 18,100 bankruptcy cases, representing a 23.5 percent increase over the previous year. In response to higher energy prices due to the war in Ukraine, high regulatory burdens, higher interest rates, an aging workforce, and rising inflation in other areas, German companies are under extreme pressure, with many resorting to layoffs and other cost-cutting measures.
ZF was already planning to close production in Eitorf, which will cost 690 employees their jobs by the end of 2025. Now, production in Gelsenkirchen will also close, with 200 employees laid off. The company wants to phase out employees with severance packages.
Other big layoff announcements have hit Germany’s headlines in recent weeks, with Deutsche Bahn planning to cut 30,000 employees over the next five years, although the plan is to mostly accept retirements and simply not rehire for those positions. Most of the cuts will be made in the company’s administrative positions. The impetus for the cuts came after the company, which is owned primarily by the German government, reported €1.2 billion in losses in the first six months of 2024.
Notably, the company indicates that the lost positions will be compensated for through digitization and automation, which may be “code” for artificial intelligence, with many companies expected to accelerate job cuts in back-office jobs over the coming years.
The German rail system is facing serious challenges to its aging infrastructure and now the Deutsche Bahn has become infamous for its frequent delays, with almost every second train now arriving late.
