Supplier facing crisis reduces operational hours

Reduced Workweek: Controversial Move by Struggling Auto Giant ZF

ZF, a provider of automotive parts, reduces work schedules - Supplier facing crisis reduces operational hours

In an unexpected move, global automotive supplier ZF decides to temporarily adjust work schedules at its Friedrichshafen headquarters. Starting May 15, employees will work 32.5 hours per week, with this number dropping to 31.5 hours from June 1. These changes are set to be permanent for the time being, and they affect around 2,800 employees, who will see their pay adjusted accordingly. ZF aims to save a substantial sum with this measure.

Despite the uncertainty, both the company and the works council have agreed on this arrangement, with the latter expressing concern regarding a four-day workweek option. This proposal pertains to the central research and development, as well as various divisional development departments at the headquarters.

Site manager Arnd Hermann views this measure as a compassionate response to ZF's challenging circumstances, likening it to a solidarity solution. Potentially, this model could serve as a blueprint for other German sites. However, specifics on which and how many sites this could impact have yet to be disclosed. As negotiations continue, more details should emerge.

Historically, ZF, a significant player in the automotive industry, reported significant losses last year, amounting to over one billion euros. In 2023, the company made a profit of 126 million euros. The company is majority-owned by the Zeppelin Foundation, which is headed by the mayor of Friedrichshafen, suggesting a close link between the city and ZF's operations.

Background Facts

Although the current situation at ZF Friedrichshafen AG’s headquarters does not indicate the implementation of shortened workweeks (such as Kurzarbeit or reduced weekly hours), past records show the company's propensity to use such measures during times of crisis. It is important to note that recent official statements do not provide details on any works council involvement or employee impact in this context.

ZF's financial situation remains precarious, with weakened credit metrics and high leverage leading S&P Global to downgrade its rating. However, the company is taking steps to restructure and improve operational efficiencies, focusing on electrification and circular economy initiatives. These changes have resulted in reduced restructuring costs, improved EBITDA margins, and a stable outlook for the future.

As for future plans, ZF will continue to optimize its operations, aiming for increased production volumes and better EBITDA margins by 2026. While there are no public announcements regarding the implementation of reduced working hours at the Friedrichshafen headquarters, any such decisions would typically involve negotiations with the works council and be communicated to employees as part of collective bargaining or crisis management measures.

Key Takeaways

• Although ZF announced temporary changes to work schedules, these changes are not necessarily shortened workweeks or Kurzarbeit.
• The works council and employee impact on this matter remain unclear. Any potential changes would likely be the result of negotiations.
• ZF is implementing changes to reduce costs and improve operational efficiencies, with a focus on electrification and the circular economy.
• ZF is expected to continue restructuring efforts and potentially face more challenges in the future.

1. In light of ZF's financial predicament, the company is exploring alternatives to save costs, such as increasing investments in vocational training for its EC countries' employees, which could potentially enhance business efficiency and profitability.
2. To ensure the stability of ZF's financial affairs, the management might consider seeking additional financing opportunities, possibly via strategic partnerships or investments in promising companies that align with ZF's focus on electrification and the circular economy.

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