ZF Friedrichshafen, a major German auto supplier for BMW and Volkswagen, is facing sharply rising refinancing costs as the wider German auto industry struggles. The company’s latest five-year bond carries a 7% interest rate, up from 2% in 2019, compounding financial pressure already driving thousands of planned job cuts—especially in its EV division.

ZF faces more than €2 billion in annual debt maturities from 2027–2030 and over €13 billion to refinance by decade’s end. Its debt stems largely from two major acquisitions—TRW Automotive and Wabco—intended to pivot toward electric and software-defined vehicles. However, the EV slowdown, competition from Chinese manufacturers, and supply-chain disruptions have made these bets far riskier. Moody’s rates ZF at the weaker end of Ba2, with higher borrowing costs weighing on cash flow.

The company’s margins remain thin, and its German operations are undergoing restructuring to restore competitiveness. ZF reported declining sales, a 2.3% operating margin, and has warned that its transformation will continue to drag on profits. It plans to cut around 14,000 jobs in Germany by 2030, while Bosch expects to shed about 13,000 positions in its mobility division. Germany’s auto supply sector has cut nearly 50,000 jobs this year, with insolvencies at a record high.

Financing conditions for suppliers are worsening as banks retreat from the sector, pushing companies toward costlier borrowing options such as sale-and-leaseback deals or high-interest Nordic bonds. Some firms have already fallen into creditor control.

The situation has become serious enough that German leaders are intervening. Chancellor Friedrich Merz has urged the EU to soften its 2035 phaseout of combustion-engine vehicles, warning that Germany’s industrial base—and national prosperity—are at risk if the automotive downturn accelerates.