ZF shifts strategy as hybrid demand eases debt pressure
ZF Friedrichshafen is seeing stronger orders for hybrid and combustion-engine components as the pace of electric vehicles (EV) adoption moderates.
Michael Frick, CFO of ZF, told Bloomberg the company is shifting from an EV-first approach to supplying components across electric, hybrid and internal combustion engine platforms.
The German automotive supplier’s move is intended to bolster the balance sheet and improve refinancing prospects.
ZF faces refinancing needs exceeding €13bn ($15.31bn) by the end of the decade, amid higher interest rates and weaker operating margins.
The company has begun plans to eliminate about 14,000 roles, including within its EV division, as part of efforts to stabilise finances.
Frick said slower uptake of battery-EVs is sustaining demand for hybrid systems, adding that European plug-in hybrid demand increased by roughly one-third last year, supporting ZF’s powertrain business.
The strategy shift forms part of broader efforts to cut debt after ZF’s credit ratings fell below investment grade.
The downgrade followed two acquisitions totalling about $20bn aimed at expanding electric and software-defined vehicle capabilities.
ZF acquired TRW Automotive and WABCO in 2015 and 2020, respectively.
Frick said borrowings fell by a low triple-digit million-euro amount over the past year and that the company is working towards regaining investment-grade status.
According to the report, ZF plans to use part of its €6bn liquidity to buy back a substantial share of bonds due in 2027.
Remaining maturities are expected to be met through operating cash flow and proceeds from ongoing transactions.
In December, ZF sold its driver-assistance business to Samsung Electronics-owned Harman International for €1.5bn.
The company is also reviewing options for other units, including a potential sale of its Lifetec division, partnerships across parts of its powertrain operations and equity realisation from its wind business.
The company is also seeking to grow in defence, aiming to double exposure from a low base, with defence expected to represent about 1% of revenue by 2028, the report added.
"ZF shifts strategy as hybrid demand eases debt pressure" was originally created and published by Just Auto, a GlobalData owned brand.
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