- Top 10 Car Features Women Love - October 7, 2023
- 2016 Ford Mustang Shelby GT350R Hot Lap! – 2016 Best Driver’s Car Contender - September 10, 2023
- Fixing the ’67 Jeep Wagoneer! | Roadkill Garage - September 9, 2023
ZF Friedrichshafen is poised to overtake Continental as the supplier rivals navigate fierce headwinds to tackle the disruptive shift to electric and self-driving vehicles.
ZF, which has customers including BMW and Porsche, met its profit-margin target last year amid a double-digit jump in revenue, even as the further fallout from the COVID-19 pandemic and major supply shortages weighed on the industry.
“It was an exceptionally challenging year for our company,” CEO Wolf-Henning Scheider said in an interview at ZF’s headquarters overlooking Lake Constance. “We could have generated more revenue, but growth was held back by headwinds like the chip shortage, rising raw material costs or much higher freight rates.”
Revenue last year rose by at least 10 percent and the operating profit margin was between 4.5 percent to 5.5 percent, Scheider said. The privately held engineering group will report detailed full-year earnings on March 17.
The rise indicates revenue of about 36 billion euros ($40.9 billion) or higher, which would exceed Continental’s targeted sales of as much as 33.5 billion euros for 2021.
Continental lowered its outlook in October and last year separated its powertrain operations.
Tracing its origins back to airship pioneer Ferdinand von Zeppelin, ZF is under pressure to pivot to the electric and self-driving age. The supplier specializes in making high-performance transmissions for upscale combustion cars, a component that risks becoming gradually obsolete in the move to battery-powered vehicles.
As companies navigate the shift, early radical decisions have been rewarded. U.S. supplier Delphi in 2017 spun off its powertrain business to focus on its autonomous vehicle efforts.
Aptiv now has a market value of nearly $40 billion, while Sweden’s Autoliv in 2018 separated its electronics unit that now trades as Veoneer.
In contrast, Continental took until last year to carve out its powertrain business with its share price more than halving since 2018.
ZF catapulted itself into the upper echelons of global automotive suppliers with the $12.9 billion acquisition of TRW Automotive to focus on EV components and safety systems.
In 2020, it bought Wabco Holdings in a $7 billion deal to add commercial-vehicle technology. The company has stopped allocating funds to the development of new combustion-engine technology two years ago.
ZF remains “open toward acquisitions, even if in the next three to four years they might not be on a scale like the Wabco deal,” Scheider said, while divestments are an option too. “We review our portfolio continuously to see if we’re still the best owner for a business unit.”
Incorporating Wabco forced ZF to weigh painful restructuring decisions to cut costs when the COVID-19 pandemic erupted at the same time.
Labor unions warned global headcount might be cut by as many as 15,000 people, roughly 10 percent of the workforce. Management had signaled cutbacks might be needed to reduce the risk of breaching credit covenant agreements.
The talks over headcount reductions and the future of factories have progressed but are not finalized entirely yet, Scheider said, expecting headwinds including the ongoing chip shortage to last for some time.
“New technology like electric mobility, autonomous driving or software offer more revenue potential for ZF than we generate with existing technology,” Scheider said. “Our business in 2030 should be bigger than now.”