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Conti wants to shrink: Part of the car division under scrutiny

2023-12-04T13:15:45.099Z

Highlights: Conti wants to shrink: Part of the car division under scrutiny. Continental is putting parts of its automotive supply business to the test. The company is examining the possibility of spinning off parts of the automotive division. CEO Nikolai Setzer wants to focus on profitable and high-growth fields of the future and to become even more of a technology partner to the automotive industry from a pure parts supplier. The division is still as large as the company's own tire business, with sales of around 15 billion euros.



Status: 04.12.2023, 14:04 PM

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View of the logo of the tire manufacturer Continental and a stop sign. © Roberto Pfeil/dpa

Continental CEO Nikolai Setzer wants to further streamline the automotive supplier. After the combustion engine business was already spun off as Vitesco, he is now putting other parts of the auto parts segment to the test.

Hanover - Continental is putting parts of its automotive supply business to the test. The company is examining the possibility of spinning off parts of the automotive division, CEO Nikolai Setzer announced on Monday at the Dax Group's Capital Markets Day in Hanover. Overall, it accounts for around a quarter of the division's turnover. However, he ruled out a complete sale of the business unit.

Specifically, it is initially about the business with car cockpits and displays. The business unit, which has a turnover of 3.5 billion euros to date, will initially be set up independently in order to be able to examine possible options. From an investor or a joint venture to a sale or IPO, everything is possible.

Focus on future-oriented fields

However, nothing has been decided yet, and Setzer did not give a timetable when asked. In addition, the same is being examined for other, smaller peripheral areas of the division with a total turnover of 1.4 billion euros. Setzer did not yet give details. However, the autonomous driving business is not under scrutiny, Setzer emphasized.

With this step, Continental intends to focus on profitable and high-growth fields of the future and to become even more of a technology partner to the automotive industry from a pure parts supplier. In the summer, the Group had already announced that it would separate the automotive business in the Contitech division and would also examine all options here, from the entry of a partner to a sale or IPO. Among other things, the division manufactures hoses and pipes, but also supplies the mining industry with conveyor belts, for example. The conversion here is to be completed by 2025, Setzer announced, but he did not yet give details of possible talks with potential partners.

No complete exit from the automotive division

Two years ago, the group had already outsourced the combustion engine business in Vitesco and floated it on the stock exchange. Recently, there had been speculation that Continental could concentrate on the profitable tire business and Contitech's industrial division, such as conveyor belts. Setzer has now rejected this. "Automotive will remain with us and will continue to be a strong pillar in the future," he said. It was concluded that Continental was the best owner for this area. "And we see great potential here." Even after the possible spin-off of the cockpit business and the other divisions, the division is still as large as the company's own tire business, with sales of around 15 billion euros. "That still makes us a big player."

Overall, Continental has recently fallen short of its own expectations, Setzer admitted. The targets set in 2020 have not yet been achieved. "In the automotive sector in particular, it is taking longer than expected in 2020. We are not satisfied with what we have achieved." In order to reduce costs, Continental now also wants to reduce its expenditure on research and development in this segment. In the automotive sector, this expenditure is expected to fall from the current twelve percent of sales to eleven percent initially and in the medium term - i.e. in three to five years - to less than ten percent.

Development centers to be merged

In order to achieve this, the number of development sites worldwide is to be reduced from the current 82. Above all, it is a matter of merging small and inefficient sites with others. In addition, Continental had already announced that it would cut jobs in the division's administration. This is expected to save 400 million euros. According to reports, around 5500,<> administrative posts are to be eliminated.

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Continental, on the other hand, intends to increase its dividends to its shareholders. Instead of the previously promised 15 to 30 percent of net profit, 20 to 40 percent will be paid out as a dividend in the future, announced CFO Katja Garcia Vila. dpa

Source: merkur

All news articles on 2023-12-04

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