Difficult Transformation to Electrification: The Three Giants of the European and American Automotive Supply Chain Struggle to Survive, Massive Layoffs, Ford Motor Cuts Electric Pickup Production

The wave of electrification transformation is coming, but European and American automotive suppliers are struggling with the transformation and are forced to lay off employees. According to media reports, traditional automotive supplier giant ZF Friedrichshafen recently announced a layoff of 12,000 people, and international first-tier component suppliers Bosch and Faurecia have also announced layoffs. In addition, due to weak demand for electric vehicles, Ford Motor has decided to reduce the production of the all-electric F-150 Lightning while increasing the production of two gasoline-powered vehicles.

According to reports, ZF Friedrichshafen is expected to lay off 12,000 people in Germany in the next six years, which is almost a quarter of all jobs in ZF Friedrichshafen Germany. The actual number of layoffs may reach 18,000. A spokesperson for ZF Friedrichshafen said that the company does not want to lay off employees, but it is necessary to withdraw some positions in the process of electrification transformation.

The financial report shows that ZF Friedrichshafen achieved sales of 23.3 billion euros in the first half of 2023, an increase of about 10% compared to the same period last year, with overall good financial expectations. However, the company's main source of revenue is related to gasoline-powered vehicles. In the context of the automotive industry's transition to electrification, such a business structure may have some hidden risks.

At the same time, Bosch and Faurecia, two international leading component suppliers, are also affected. Bosch announced on Friday that it plans to lay off 1,200 people by the end of 2026, of which 950 people (about 80%) are in Germany. The direct reason for Bosch's layoffs is that the development of fully automated driving is slower than expected, and the company attributes the layoffs to economic weakness and high inflation. Bosch stated in an official statement: "In addition to other factors, the economic weakness and high inflation caused by the increase in energy and commodity costs are currently slowing down the transformation."

Faurecia also announced on the same day that it will lay off 1,150 people worldwide, as the company is merging its hybrid and electric vehicle component manufacturing departments. Faurecia stated: "We hope to enhance competitiveness by having a more agile, coherent, and complete organization."

All three companies are striving for electrification transformation. ZF Friedrichshafen announced the continued adjustment of its organizational structure in June last year. The passenger car chassis technology and active safety technology divisions will be merged to form a new comprehensive chassis solution division. It has also launched a 75 kg ultra-compact passenger car electric drive system, developed electric vehicle thermal management systems and wire control systems. Bosch, in line with the trend of "software-defined cars," adjusted its automotive business structure in May 2023 and established a separate Bosch Intelligent Traffic business unit. It also acquired the UK autonomous driving startup Five. Faurecia announced the launch of the Move Up plan in its 2022-2025 strategic and financial outlook, focusing on four business divisions: powertrain systems, thermal systems, comfort and driving assistance systems, and vision systems.

Meanwhile, although American manufacturers are also undergoing electric vehicle transformation, the transition is not easy due to the sluggish demand for electric vehicles. Ford Motor announced on Friday that it will increase the production of its Bronco SUV and Ranger pickup trucks and reduce the production of its all-electric F-150 Lightning due to lower-than-expected demand for electric vehicles. Ford Motor stated that these production changes are aimed at matching customer demand.

Jim Farley, CEO of Ford Motor, said, "We are leveraging our manufacturing flexibility to provide choices for our customers while balancing growth and profitability. Customers love the F-150 Lightning, which is the best-selling electric pickup truck in the United States. We see a bright future for electric vehicles, especially as we begin offering access to the Tesla charging network this quarter, combined with our upcoming lineup of digitally advanced electric vehicles."

This marks a significant reversal for Ford Motor after significantly increasing its electric vehicle production capacity in 2023. It has been reported that Ford Motor will reduce the shifts at the Rouge Electric Vehicle Center in Michigan, where the F-150 Lightning is produced, affecting approximately 1,400 employees, effective April 1st. However, Ford Motor has declined to specify how the canceled shifts will impact vehicle production.

Ford Motor stated that approximately half of the affected employees will be reassigned to the Michigan Assembly Plant, where the Bronco and Ranger are produced. Others will be reassigned to nearby plants or are expected to participate in the "Special Retirement Incentive Program" agreed upon in the 2023 Ford Motor-United Auto Workers contract. Meanwhile, the Michigan Assembly Plant will add a third shift this summer to increase production of the Bronco and Ranger, creating an estimated 900 new jobs.

Data shows that sales of the F-150 Lightning increased by 55% last year, surpassing 24,000 units. However, the sales pace has not been as fast as before. Ford Motor stated that the model is expected to achieve "further growth" in 2024 but will not reach the production level of 150,000 units considered during the factory upgrade last year.