New Delhi/Mumbai: ZF Friedrichshafen AG reported improved operating performance for 2025, boosting profitability and cash flow while cutting debt, even as global automotive demand remained subdued and the transition to electric mobility progressed slower than expected.
The German technology group posted sales of €38.8 billion in 2025 compared with €41.4 billion in the previous year, reflecting a nominal decline of around 6 per cent. However, on an organic basis, excluding currency and merger impacts, the company registered a modest growth of 0.6 per cent.
The company exceeded its profitability guidance, with adjusted EBIT rising to €1.7 billion from €1.5 billion in 2024. The adjusted EBIT margin improved to 4.5 per cent, above the guided range of 3 to 4 per cent. Adjusted free cash flow saw a sharp jump to €1.4 billion from €305 million a year ago, underlining stronger operational efficiency.
Despite the improved operating metrics, ZF reported a net loss of about €2.1 billion for 2025, primarily due to a one-time charge of around €1.6 billion linked to the early termination of non-profitable electric mobility projects.
ZF Chief Executive Officer Mathias Miedreich said the company’s focus has shifted firmly towards profitability and performance rather than scale. He noted that while the company has surpassed its financial targets, sustaining the upward trajectory would require continued discipline and execution across operations.
The company also made progress in reducing its debt burden, cutting financial liabilities by roughly €250 million during the year and bringing net debt down to €10.2 billion. Chief Financial Officer Michael Frick said the deleveraging effort reflects improved financial stability and will continue through internal cash generation as well as selective divestments.
As part of its strategic realignment, ZF agreed to sell its passenger car Advanced Driver Assistance Systems (ADAS) business to Harman International in a deal valued at €1.5 billion. The transaction, expected to close in the second half of 2026 subject to regulatory approvals, is aimed at sharpening the group’s focus and accelerating debt reduction. The company, however, will continue to offer ADAS solutions in its commercial vehicle segment.
ZF has also taken steps to restructure its Electrified Powertrain Technology division to improve competitiveness, amid slower-than-anticipated adoption of electric vehicles globally. The restructuring includes scaling down unviable projects and implementing cost-saving measures in collaboration with employees.
The company highlighted that major contracts, including continued supply agreements with BMW Group for its eight-speed automatic transmission and electrified variants, reinforce customer confidence in its technology portfolio, particularly in hybrid and low-emission mobility solutions.
Research and development expenditure stood at €3.3 billion in 2025, maintaining a high investment intensity with an R&D ratio of 8.6 per cent. Capital expenditure declined to €1.8 billion from €2.3 billion in the previous year as the company tightened spending.
Globally, ZF’s workforce declined by about 5 per cent to 153,153 employees as of December-end 2025. In Germany, headcount fell to just over 49,000, with the company continuing efforts to optimise staffing levels through voluntary measures such as attrition and reduced working hours.
In February 2026, ZF raised €1 billion through a six-year bond issuance at a 5.5 per cent coupon, which was heavily oversubscribed, signalling strong investor confidence in its turnaround strategy.
Looking ahead, the company expects 2026 to remain challenging, particularly in the commercial vehicle segment, with no significant recovery in demand. It has projected sales of over €38 billion and an adjusted EBIT margin in the range of 4 to 5 per cent, along with free cash flow exceeding €1 billion.
Miedreich also flagged regulatory challenges in Europe, calling for greater flexibility in emissions policies and highlighting the role of plug-in hybrids as a transitional technology in the shift towards full electrification.
The company’s performance reflects a broader trend in the global auto components sector, where firms are prioritising profitability, cost discipline and strategic focus over rapid expansion amid uncertain market conditions.