European automotive suppliers hit a perfect storm as Bosch, Valeo, ZF Friedrichshafen and Schaeffler cut 50,000 jobs

This year is testing not only vehicle manufacturers, but also the companies that supply the automotive industry-sharply at odds with the upbeat forecasts made at the start of the year.

Right now, the car industry is facing problems serious enough that drastic action is being considered.

That has already been evident among several carmakers, and it is now increasingly visible across the components sector, affecting suppliers such as Robert Bosch, Valeo and Schaeffler, among others.

What is unfolding looks like a perfect storm driven mainly by two forces: intensifying competition from Chinese manufacturers and weakening demand. Together, these pressures are creating a domino effect throughout Europe’s supply chain.

“As manufacturers lose market share, their suppliers are inevitably hit as well.”
Pedro Pacheco, Gartner analyst

Layoffs reach 50,000

Robert Bosch-the world’s largest supplier by sales, providing components for almost all of the 1.5 billion cars in circulation worldwide-has announced more than 12,000 job cuts globally. Of these, 7,000 will be in Germany.

In addition, the company has said it intends to reduce working hours in Europe from 38–40 hours per week to 35 hours per week, which would result in a 12.5% pay cut. Bosch says the move is linked to falling demand for intelligent driver-assistance systems and autonomous-driving solutions.

Next comes ZF Friedrichshafen, the world’s second-largest components supplier (by sales), which plans to cut between 11,000 and 14,000 jobs in Germany alone by 2028. The company justified the decision by pointing to the heavy debt accumulated through its acquisitions of TRW and Wabco.

More suppliers have since announced job cuts, pushing the global reduction in headcount to over 50,000. In the first six months of the year alone, European suppliers said they intended to eliminate around 32,000 roles-more than during the Covid-19 pandemic.

“Although around 100,000 new jobs are expected by 2025, the reality shows a net loss of around 56,000 jobs,” says Benjamin Krieger, Secretary General of CLEPA (the European Association of Automotive Suppliers).

Factory closures

Layoffs are not the only outcome of an industry that is becoming increasingly fragile. A growing number of suppliers are also announcing plant closures, including Valeo, which has already revised down its annual sales forecasts twice this year.

Of the three factories Valeo said in July it would close in France, only one will keep its doors open-although with a reduced workforce-according to a company spokesperson speaking to Automotive News.

Michelin is also planning to shut two plants in France by 2026, citing weaker demand and Asian competition.

Slow electrification is one of the problems

According to Matthias Zink, President of CLEPA, “the main problem for the components industry is the acceleration towards e-mobility, which has been far too slow,” he said in an interview with Automobilwoche. Zink does not expect an easy road ahead for the sector: “the biggest impact is still to come”.

Gartner analyst Pedro Pacheco likewise said suppliers are being squeezed by several factors, including the advance of electrification, which demands a substantial reshaping of strategy.

Pacheco argues that while restructuring is vital, if a supplier commits to this new direction and implementation progresses more slowly than expected, the business may end up suffering financial and operational consequences.

One remedy, he suggests, is to be more selective about customers. “Suppliers need to diversify their customer base and strengthen relationships with new ‘players’,” he said.

By way of example, Schaeffler was forced to lay off around 2,800 people in Germany and close two factories after its main customer, Volkswagen, began to run into difficulties.

“The automotive supply chain is going through a seismic shift. Suppliers must adapt if they want to survive in an environment defined by electrification, software and new competition.”
Pedro Pacheco, Gartner

Sources: Automotive News Europe