Conti divides its supplier operations - prioritizes tire-related endeavors
The Continental Corporation's subsidiary, Continental AG, is revisiting its origins. In the near future, the Hanover-based firm intends to partition the segments of electronics, brakes, and interior components and reinstate the tire sector as the principal focus.
The prominent tire producer and vehicle component provider, Continental, is planning to detach itself from its financially strained automotive supply sector. This division, comprising electronics, brakes, and interior components, is set to be revamped via a pure spin-off on the stock market, as sanctioned by the Continental administration headed by CEO Nikolai Setzer. The board of supervisors and primary shareholder meeting must still endorse the strategy within the ensuing year. The spin-off is predicted to conclude by the end of 2025. The prosperous tire business will persist within the organization, while the ContiTech division specializing in plastics and rubber will be aligned further with industrial clients.
Due to the sluggish dollar economy in the automotive supply sector over the past years, Continental has incurred deficits. Presently, a substantial cost-reduction plan is being implemented, targeting a reduction of 400 million euros in annual costs from the next fiscal year. This is being achieved by shedding around 5,400 administrative positions and trimming research and development, resulting in a total of 12,550 job losses. The aim is to rejuvenate the division into profitability and make it appealing to investors.
During a pure spin-off, shareholders automatically receive new shares of the spun-off segment in their portfolio, empowering them to either retain or sell shares. No funds are extracted from the Continental group by such a process.
Back in the day, Continental had already spun off its powertrain sector into the firm Vitesco and led it to the stock market through a spin-off. Since then, the Regensburg-based company has been acquired by the automotive and industrial supplier Schaeffler.
As of the end of September, the Continental group had around 195,000 employees, with nearly 96,400 employed in the automotive supply sector. The automotive sector record sales approximating 20.3 billion euros the previous fiscal year. The other two divisions of the company, Tires and ContiTech, employed a combined total of around 100,000 individuals. The Tires division reported sales of around 14 billion euros, while ContiTech achieved revenue of around 6.8 billion euros.
Following the plan, Dax companies might seek investment opportunities in the newly spun-off segment of electronics, brakes, and interior components from Continental companies, as they aim to cut costs and focus on profitability. Post-spin-off, Dax companies may also consider strengthening partnerships with the continued tire business within the Continental group, given its prominence in the market.
