German auto parts and tire maker Continental AG is looking at asset sales and further cost cuts to protect investor rewards and revive its automotive division, which has lagged behind rivals in recent years.
Continental wants to relaunch the automotive division Photo: Shutterstock
Continental, a company that is also present in Romania, announced on Monday that it intends to separate from the division of “user experience”, which produces displays for the interior of automobiles, to prepare it for a potential sale, change of ownership or initial public offering. Also, Continental will reduce its expenses for research and development, the German group announced on Monday at a meeting with investors, organized in Hanover.
All these initiatives will help the automotive division “to become better, faster and more agile”, said Continental’s financial director, Katja Garcia Vila.
Continental, whose market value has fallen by almost 40% in the last five years, is among the German industrial giants that have been affected by the transition to a cleaner economy. The transition is a particularly difficult one for the German auto sector, which has grown thanks to the production of quality cars equipped with combustion engines, and which has benefited from hundreds of local component manufacturers. With the transition to battery-powered cars, the lead of the German auto industry is evaporating.
At Monday’s meeting with investors, Continental announced that it plans to reach sales of between 51 and 56 billion euros in the next three to five years, up from 39.4 billion euros last year. The automotive division would provide half of the total turnover. Also, Continental increased the plans regarding the percentage of profit allocated for the payment of dividends up to 40% of the net profit, from 30% previously.
In addition to the separation from the division of “user experience“, the German group informed that it is also analyzing other assets in the automotive field that generate sales of approximately 1.4 billion euros, which means that approximately a quarter of the entire automotive division is under review.
Continental previously announced the elimination of several thousand jobs to cut costs by around 400 million euros a year starting in 2025. Additional measures announced on Monday include reducing the number of the group’s research facilities, which currently stand at 82, to to reduce R&D spending to 11% of sales in two to three years and to less than 10% of sales in three to five years, from a level of 12% forecast for this year.
However, any strategic change of direction at Continental will need the support of the majority shareholder, the Schaeffler family, which is currently reviewing its empire in the automotive industry. The clan that controls Continental and Schaeffler AG is now trying to take over the other half of the shares in Vitesco Technologies Group AG that it does not own, in a €3.8 billion deal.
The Continental Group has approximately 200,000 employees in 57 countries around the world, of which 59,000 in Germany.
All 5 Continental divisions are represented in Romania. Continental owns seven production units and four engineering centers in Timisoara, Sibiu, Carei, Nădab, Braşov and Iasi.