ZF Considers Options for Driveline Business Amid Strategic Review

German automotive supplier ZF Friedrichshafen is evaluating the future of its Electrified Powertrain Technology Division, with options ranging from a carve-out to a possible exit from the driveline business, WirtschaftsWoche reported on Thursday, citing multiple sources familiar with the matter.

The division, despite its name, includes not only electric drivetrains but also hybrid and conventional passenger car transmissions. The business unit accounts for approximately 32,000 employees and €11.5 billion in annual revenue — roughly one-fifth of the group’s workforce and one-quarter of its total sales.

One of the scenarios under discussion is a spin-off of the division, referred to internally as “Verde,” which would open the door to bringing in a strategic partner or potential buyer. While such a carve-out has been under consideration since February, insiders say an outright shutdown of the division — a “ramp down” — has also been examined as a contingency.

ZF confirmed to WirtschaftsWoche that a ramp-down scenario is among the options being analyzed, but emphasized that it is “unlikely and strategically undesirable.” A company spokesperson said, “Alternatives in which we do not find a partner must also be considered. The most unfavourable option would be to phase out the active business without any new product developments.”

Despite the ongoing review, ZF continues to invest in new driveline technologies. At its recent E-Mobility Tech Day, the company unveiled updates to its eight-speed hybrid transmission and introduced its new SELECT platform — a modular system combining electric motors, inverters, gearboxes, and software, aimed at offering flexible and cost-effective drive solutions to OEMs.

A final decision on the driveline unit’s future is expected in the second half of 2025. Meanwhile, the company is reportedly operating under tighter financial conditions. WirtschaftsWoche said ZF has renegotiated a key financial covenant with lenders, temporarily raising the net debt to EBITDA ratio to 4.0 for five quarters, with the intention of returning it to 3.25 in 2026. The next quarterly covenant test is scheduled for June 30.

Failure to meet the covenant terms could prompt lenders to cancel existing credit lines or demand immediate repayment, adding urgency to ZF’s internal review.