Continental plans decade-long restructuring programme

Continental plans decade-long restructuring programme

1 October 2019

Continental has mapped out a restructuring plan set to last a decade, as the supplier looks to restore profits after suffering due to falling vehicle production.

The supplier will invest around €1.1 billion during the period through to 2029, aiming to achieve a reduction in gross costs of €500 million annually starting from 2023.

The company has said that according to a preliminary analysis, its plan will affect up to 20,000 of its 244,000 jobs worldwide, including around 7,000 in Germany. However, Continental will create a number of positions as it expands its software-based portfolio. Job cuts are expected due to lower business volumes and the discontinuation of operating activities. The supplier will be selling some areas of the business to external parties, according to a statement.

Shifting gear

Continental has also decided to stop growing its hydraulic components business and is reviewing operations that make parts for exhaust-gas treatment and fuel-supply systems as it shifts its focus to electric vehicles (EVs). The supplier recognises the role that ′disruptive' technologies have to play in the future automotive landscape, due to the tightening of political targets that are leading to a market in which future technologies are determined by regulations.

′Thanks to our organisational realignment, our solid balance sheet structure and our Strategy 2030, we are well prepared for the challenges ahead,' says CEO Elmar Degenhart.

′We see the technological upheaval in our industries first and foremost as a huge growth opportunity. With our structural programme, we are also responding proactively to the crisis in the automotive industry and, like 10 years ago, we will emerge stronger,' Degenhart adds.

Key growth areas for Continental include functional solutions for both autonomous and connected driving; integrated software-based system solutions, including a growing number of services for mobility customers; organic growth of its vehicle supply business and an expansion of its business with industrial customers and end customers.

The supplier is also considering spinning off its powertrain business, rather than floating it on the stock exchange. Continental has been planning to split its powertrain business since summer last year but, in April, pulled back from plans to float the division.

Hard times

The move to restructure highlights the effects that market weakness is having on automotive suppliers as well as carmakers.

Elsewhere, Volkswagen Group has reduced production plans for this year by about 450,000 cars to adapt to cooling demand and avoid the build-up of inventory. BMW also said it would align production plans with demand.

Last year, production bottlenecks caused by the introduction of WLTP caused financial issues for Valeo, due to the reduction in demand for its vehicle components.