Continental could spin-off powertrain division

Continental could spin-off powertrain division

4 September 2019

Continental is considering spinning off its powertrain business, rather than floating it on the stock exchange.

The company has been planning to split its powertrain business since summer last year, but in April pulled back from plans to float the division. By spinning it out instead, the German supplier will have more options for separation as market conditions grow steadily more challenging. With a spinoff, the implementation of a new corporate structure will not be dependent on the volatile stock market.

The company will now review its options and has announced that the business would be known as Vitesco Technologies. This review will be conducted in parallel with the company's ongoing preparations for a potential partial IPO of the division.

Better options

′This creates further manoeuvring room for Continental, given an accelerating trend toward powertrain electrification and the hard-to-predict conditions surrounding a potential partial IPO in 2020,' the company says in a statement. ′In addition to examining the technical and legal requirements, the review of this option also includes the possibility of a complete spin-off.'

The Executive Board and Supervisory Board will decide on the actual implementation after the review has been completed.

″This approach ensures that our powertrain business will be able to embark on its promising course under the best possible conditions in 2020 – regardless of whether it does so via a partial IPO or a spin-off. Also, it provides all stakeholders with clear guidance on future planning so that they can focus on the actual business, its profitable growth and successful technological expansion,″ said Continental CEO Elmar Degenhart, explaining the reasoning behind the review.

Jobs secure

On this subject, he reaffirmed that the Powertrain employment guarantee would continue to apply through 2023 in the event of any changes to the company: ″Regardless of which approach is taken toward independence, the key points agreed upon with the employee representatives in ′Continental in Motion – our Alliance for the Future,' published on April 18, 2018, apply to Powertrain.″

Given the disruptive powertrain market, Andreas Wolf, head of the powertrain business, emphasised the importance of readily available entrepreneurial freedom to increase future business success: ″We are looking forward to 2020 and are eager to get started. We have a strong position, particularly in the areas of electronics and electrification, which are the foundations on which we will implement our profitable growth strategy. The important thing now is to step in early and play a greater role in shaping this unique growth market. In such a highly volatile and dynamic environment, we now need clarity fast regarding the next steps, as well as a high degree of independence and flexibility.″

Wolf went on to explain that the partial IPO has to date been the preferred option of many to achieve these goals. The review of a spin-off allows the company to consider a further option aimed at ensuring that Vitesco Technologies has the best possible starting position for success in 2020.